Democratisation in Indonesia: From Transition to

Institutions, Economic Recovery, and Macroeconomic
Vulnerability in Indonesia and Malaysia
Thomas Pepinsky
Department of Political Science
Yale University
P.O. Box 208301
New Haven, CT 06511
[email protected]
This version: July 17, 2006
8844 words (including notes)
Prepared for the workshop East Asia Ten Years After the Crisis
The Australian National University, Canberra
July 21-22, 2006
DRAFT: Comments welcome!
Please do not cite without permission
Institutions, Economic Recovery, and Macroeconomic
Vulnerability in Indonesia and Malaysia
1.
Introduction
In Indonesia and Malaysia, the Asian Financial Crisis was as much a political crisis as an
economic one. Policies adopted by the respective governments had fostered over a decade of
strong economic growth, but this growth came with structural weaknesses that left each country
vulnerable to the vagaries of investor confidence and cross-border capital movements. These
weaknesses arose from each country’s political economy: in each country an autocratic
government used economic policy and political favoritism to reward its supporters with little
regard for their potential downstream costs. The Asian Financial Crisis led each country to take
extraordinary adjustment measures, and ignited distributional conflicts that ultimately drove
Soeharto from power and severely tested the ruling coalition in Malaysia. Subsequently, the
years since the crisis have seen political contests in each country over the implementation of
reforms designed to foster economic recovery.
This chapter shows how politics has defined the course of economic recovery in
Indonesia and Malaysia. Malaysia’s economic recovery began earlier and remained more robust
than other countries in the region as a result of the country’s adoption of selective capital
controls and an exchange rate peg together with expansionary macroeconomic policy. But
Malaysia’s successful stabilization package meant that the government could escape the tough
economic reforms that would promote more healthy long-term growth. Most of the same
structural weaknesses that made the country vulnerable to the Asian Financial Crisis persist in
Malaysia today, even after the retirement of former Prime Minister Mahathir Mohamad. These
include extensive political intervention in the economy, as well as corruption and inefficiency in
government owned or politically favored firms. By contrast, the fall of Soeharto and Indonesia’s
subsequent democratization, along with IMF mandated stabilization measures and institutional
reforms, have not have the much hoped for effect of promoting rapid economic recovery. In
particular, Indonesia’s decentralization program has increased opportunities for local corruption,
and the implementation of economic reforms has been hamstrung by political instability and
corruption at the national level. Only under President Susilo Bambang Yudhoyono, elected in
October 2004, have reform measures began to show fruit.
The experiences of Indonesia and Malaysia suggest several insights for the political
economy of economic reform. Far-ranging political transitions, as took place in Indonesia, can
lead to delays in economic recovery due to the extensive transactions costs associated with
institutional re-equilibration—the process whereby economic and political actors adjust to new
institutional rules. Democratic transitions and fiscal decentralization, and competition over the
ability to define new institutional rules, can yield new opportunities for rent-seeking. The
product of these reforms in Indonesia has been a complex regulatory regime coupled with weak
legal enforcement. While normatively desirable, democratization and fiscal decentralization
have not overcome the fundamental problem of weak institutions that hinder economic growth.
Political continuity, as in Malaysia, minimizes the transactions costs associated with institutional
re-equilibration. The political tradeoff is that economic recovery masks the need for economic
reform, and obscures the same macroeconomic vulnerabilities that earlier led to a severe
economic crisis.
The focus on institutions here does not deny the importance of other influences on the
course of economic recovery in the two countries. Indonesia’s crisis was far worse than
Malaysia’s crisis, in part due to the almost total breakdown of Indonesia’s economic and political
institutions in 1998. This means that Indonesia had further to go to achieve economic recovery
than Malaysia did. Political changes in Indonesia also extended far beyond legal and
institutional reform: in the provinces of East Timor, Aceh, and West Papua, secessionist
movements have threatened the very integrity of the Indonesian state. Sectarian violence in
Maluku and Kalimantan brought simmering social conflicts to light, and the Indonesian military
has sought contain the new threat of Jemaah Islamiyah while reevaluating its own role in
Indonesian politics. Malaysia has had none of these problems. Corruption, too, has always been
more extensive in Indonesia than in Malaysia. Yet there is still much to learn from these two
countries. Focusing on the (often informal) institutional bases of each country’s economy helps
us to understand the mechanisms through which growth occurs and macroeconomic
vulnerabilities develop. On this count, the comparison between institutional change and
continuity in Indonesia and Malaysia reveals important themes in East Asia’s recovery.
2.
Economic Crisis and Recovery
Malaysia’s economic contraction was shallower, and its subsequent growth more robust,
than Indonesia’s. A common misperception among many regional specialists is that Malaysia’s
crisis was less severe than Indonesia’s because Indonesia was ex ante more vulnerable.
Indonesia did face a more severe problem of imprudent lending than Malaysia, manifest in a
burden of non-performing loans exceeding by some estimates 40% of all loans in Indonesia
compared to around 20% in Malaysia.1 But Malaysian development financing was concentrated
in the stock market rather than in bank lending: Malaysia’s stock market capitalization exceeded
227% of GDP in 1995, compared to just 19% in Indonesia (cited in Jomo and Hamilton-Hart
1
J.P. Morgan estimated that at the height of the crisis, between 30 and 35 percent of all loans in Indonesia were nonperforming. In Malaysia, the figure was 15 to 25 percent. Similar figures for Standard and Poor’s are 40 percent for
Indonesia and 20 percent for Malaysia (cited in Berg 1999: 8).
2001: 81). Between its peak on June 8, 1997 and its trough on September 21, 1998, the Jakarta
Stock Exchange Composite Index shrank by 65.3%, from 741.8 to 256.8—a severe turnaround
by any reckoning. But the Kuala Lumpur Stock Exchange (KLSE) Composite Index, between
February 21, 1997 and September 1, 1998, shrank by 79.3% from 1271.6 to just 262.7. For
Malaysia’s political economy, dominated by the stock market for the distribution of patronage in
addition to the financing of big-ticket development projects, this was a disastrous turnaround.
In fact, the ultimate severity of the economic shock in each country was endogenous to
the policies that their regimes adopted in combating the crisis. A comparison of growth rates
during the crisis illustrates economic contraction and subsequent recovery, demonstrating the
economic consequences of political events in each country (Figure 1).
25
20
15
10
5
Indonesia
0
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1 Q3
Q1
Q3
-5 Q1
1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001
-10
Malaysia
-15
-20
-25
Figure 1: Quarterly Real Growth Rates, 1996-2001 (Annualized, Seasonally Adjusted)
Source: IMF, International Financial Statistics
The data show in that economic contraction actually began earlier in Malaysia than in Indonesia,
with negative growth rates first recorded in the first quarter of 1998. As currency and stock
speculators attacked Malaysia, anti-Western outbursts by Mahathir and increasing tensions
between Mahathir and Deputy Prime Minister and Finance Minister Anwar Ibrahim contributed
further to the country’s economic downturn. But in September 1998, Malaysia embarked on its
controversial adjustment strategy of macroeconomic expansion made feasible by capital controls
with a fixed ringgit exchange rate—and Mahathir sacked his deputy. Despite this political
shake-up, Malaysia’s economic quickly stabilized, and had turned around by mid-1999. In
Indonesia, by contrast, while growth slowed abruptly in late 1997, growth did not trend negative
until the third quarter of 1998, following Soeharto’s resignation on May 21, 1998. But in the
wake of Soeharto’s resignation, the Indonesia economy contracted severely, enough that
Indonesia registered a stunning fourteen percent economic contraction in 1998. After bottoming
out in the first quarter of 1999, the Indonesian economy rebounded to register positive seasonal
growth of just under two percent in the fourth quarter of that year.
Malaysia’s comparatively rapid economic recovery despite its radical departure from
IMF orthodoxy of financial openness and macroeconomic discipline sparked some debate about
the causal role of Malaysia’s adjustment policies in spurring economic recovery. At the very
least, Malaysia’s policies do not seem to have done much harm. Even Paul Krugman, who
suggested in August 1998 a policy basket similar to Malaysia’s, has been circumspect in
attributing economic recovery to Malaysia’s policies rather than a secular improvement in
investment climate (Krugman 1999). There are reasons enough to believe that the correlation
between capital controls and the onset of economic recovery is misleading. Economic crises
never last forever, and after three quarters of negative GDP growth, Malaysia may have simply
bottomed out. Evidence in favor of this conclusion comes from the fact that South Korea and
Thailand began to recover about the time that Malaysia began to recover. Alternatively,
Malaysia might have recovered still faster had it not imposed capital controls. To assess the
counterfactual that Malaysia would have recovered even without capital controls and a ringgit
peg, Kaplan and Rodrik (2001) compared a number of economic indicators in Malaysia with
other indicators in South Korea, Indonesia, and Thailand, taking into account that the other
countries adopted IMF policies long before September 1998, while Malaysia’s economy was still
deteriorating at that time. They find strong support that capital controls in Malaysia were
associated with a smaller drop in GDP growth, industrial output, and real wages than the IMF
programs in other crisis countries.
Since 1999, the year by which the crisis in each country had finally abated, both
countries’ economies have grown steadily, although at lower rates than they enjoyed before the
crisis (Figure 2).
20000
16000
12000
Indonesia
Malaysia
8000
4000
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0
Figure 2: Real Per Capita GDP, 1990-2005
Source: IMF, International Financial Statistics
In Indonesia, per capita real GDP grew by an average of 5.66% between 1991 and 1996, but this
has slowed to 3.05% between 1999 and 2005. In Malaysia, the same figures are 6.72% between
1991 and 1996 and 3.49% between 1999 and 2005. Malaysian GDP did contract in 2001 due to
a slump in global demand for Malaysian electronic exports coinciding with a global economic
slowdown (see Martinez 2002). But the trends over time are clear: the economic crisis
represents a clear break in each country between a period of rapid economic growth amidst
relatively stable politics and a period of more modest economic growth.
3.
Indonesia: Institutional Change and Macroeconomic Vulnerability
Indonesia’s severe economic contraction drove Soeharto from power, spelling the end of
the New Order regime over which he had ruled for thirty-two years. Soeharto’s hand-picked
successor, B.J. Habibie, was singularly unable to contain Indonesia’s reformasi movement, and
in 1999 lost Indonesia’s first democratic election since the 1950s to the liberal Muslim politician
Abdurrahman Wahid (Gus Dur) of the National Awakening Party. Gus Dur, however, served
erratically, alienating pro-democracy activists and allied political parties alike while
mismanaging Indonesia’s economic recovery and using his position to amass financial resources
through the state’s logistical monopoly Bulog (Liddle 2001; Malley 2002). He himself
succumbed to a corruption scandal in 2001, succeeded by his Vice President, Megawati
Sukarnoputri of the Indonesian Democratic Party of Struggle (PDI-P). In contesting the first
direct presidential election in 2004, Megawati lost to her former Coordinating Minister for
Politics and Security, General Susilo Bambang Yudhoyono, usually known by his initials SBY.
This total of five Presidents within the space of just eight years is an important indicator of the
political changes ushered in by Indonesia’s economic crisis.
Presidential turnover notwithstanding, a persistent concern for Indonesia is the
penetration of the Indonesian government by wealthy pribumi (“indigenous,” i.e. non-Chinese
Indonesian) business figures. SBY’s Vice President is Jusuf Kalla, who had a long career as
head of the influential conglomerate NV Hadji Kalla while rising in the ranks of the dominant
party Golkar during the New Order. His brother, Achmad Kalla, currently heads PT Bukaka
Teknik Utama, a multinational firm with diversified construction investments of which Jusuf was
a commissioner until 2001. Under SBY, Bukaka and Hadji Kalla have won a number of
important concessions from central and regional governments. SBY’s wife Kristiani Herawati is
the daughter of the late General Sarwo Edhie Wibowo, who was instrumental in the massacre of
students and leftists during Soeharto’s rise to power in 1965. Many believe that she has business
connections owing to her strong family ties to the military, and efforts to extricate the Indonesian
military from the corporate world have been halting. 2 Besides Jusuf Kalla, other members of
SBY’s United Indonesia Cabinet have clear links with the Indonesian business community,
including the Coordinating Minister for People’s Welfare and former Coordinating Minister of
the Economy Aburizal Bakrie, whose family controls the influential Bakrie Group, and Minister
for National Planning Paskah Suzetta, whose business interests have included property and
investment. The Bakrie Group openly collaborates with the National Planning Board (Bappenas)
to develop its land holdings, and Aburizal’s wealth has grown substantially since he joined
SBY’s government.3 Foreign economic observers agree that business interests such as these
have hindered the course of Indonesian trade policy reform.4 Government trading monopolies
and government-owned enterprises still exist in many sectors; these firms are reported to be rife
with corruption, and privatization drives yield speculation of corruption and favoritism.5
Indonesia’s central bank is now formally independent from the executive and legislature, but
reports of interference by Kalla and others in the Bank’s monetary policy decisions are
common.6
2
Wisnu Dewabrata, “Berbisnis dengan bendera Markas Besar TNI ,” Kompas, February 8, 2006; “Definisi bisnis
militer belum jelas,” Kompas, March 4, 2006; interview with Hery Trianto, Reporter for Bisnis Indonesia, March 2,
2006.
3
“Kekayaan Aburizal meningkat,” Kompas, May 24, 2006.
4
Several interviews with officials at international development agencies in Jakarta, February-March 2006.
5
“‘Black hole-nya di situ [perdagangan]...’,” Bisnis Indonesia, February 15, 2006; “Privatisasi diminta dihentikan
sementara,” Bisnis Indonesia, March 31, 2006.
6
Interview with an economist at a foreign economic institution, February 2006.
The news is not all bad, as other economic ministers in SBY’s Cabinet, notably the
current Coordinating Minister for the Economy Boediono, Minister of Finance Sri Mulyani
Indrawati, and Minister of Trade Mari Elke Pangestu, have reputations as technocrats rather than
business figures. The technocrats have directed several contentious but much-needed policy
reforms, including fuel subsidy cuts of October 2005 that were unpopular among many lower
class Indonesians. Yet the bifurcation of SBY’s Cabinet between technocrats and wellconnected entrepreneurs recalls the policy divide under Soeharto between technocrats, and socalled “financial generals” and nationalists (see Crouch 1978; Liddle 1991: 29-32; Mackie and
MacIntyre 1994: 35-37). Based on the presence of so many members of the New Order
establishment in post-New Order governments, some have suggested that Indonesia has
developed a ruling oligarchy that has weathered a difficult institutional transition without
actually losing its power (see e.g. Robison and Hadiz 2004).
This is probably an exaggeration. Even though many members of the New Order elite
have survived the transition to democracy, the rules of the game have changed in important
ways. The change from dictatorship to democracy on a national scale is only the beginning. In
2001, Indonesia embarked on a radical policy of decentralization that dismantled many of the
institutions of centralized political rule under the New Order. Constitutional amendments in
2004 reinforced this move towards regional autonomy (otonomi daerah). Not only are national
elections democratic, so are provincial and local elections. With decentralization has come a
new phenomenon of regional splitting (pemekaran daerah, or “the blossoming of areas”),
referring to the subdivision of existing subnational political units into new ones. Since 1998,
seven new provinces have been created: North Maluku, formerly part of Maluku, in 1999;
Bangka-Belitung, formerly part of South Sumatra, in 2000; Banten, formerly part of West Java,
also in 2000; Gorontalo, formerly part of North Sulawesi, also in 2000; West Irian Jaya (Irian
Jaya Barat), formerly part of Papua, in 2003; Riau Islands (Kepulauan Riau), formerly part of
Riau, in 2004, and West Sulawesi (Sulawesi Barat), formerly part of South Sulawesi, also in
2004. With the loss of East Timor, this has raised the number of Indonesian provinces from 27
in 1998 to 33 today. Other new provinces have been proposed as well, including a province of
Central Irian Jaya, a province of East Sulawesi, and several subdivisions of Aceh (Nanggroe
Aceh Darussalam). At the sub-provincial level, over a hundred new regencies (kabupaten) and
cities (kota) have been created.
Political decentralization—in particular, fiscal decentralization—has a clear economic
logic. It removes the central government’s monopoly over the creation of many important facets
of economic policy, inducing subnational political units to compete with one another to attract
investment (see e.g. Tiebout 1956; Weingast 1995). For example, provinces that eliminate
inefficient labor regulations will attract more investment; and this will encourage other provinces
to emulate them. Combined with local level democracy, this gives citizens a powerful tool to
enhance government responsiveness and spur local economic development. Even if provincial
administrations do not respond to logic of inter-jurisdictional competition, instead using their
positions to generate personal profit or to protect vested interests, with democratic elections their
constituents will punish them for corruption and poor governance by voting them out of office.
In Indonesia, several studies have found that local level corruption has decreased since
decentralization in 2001 (Henderson and Kuncoro 2004, 2006). This is consistent with crossnational evidence, which finds a negative relationship between decentralization and corruption at
the national level (see e.g. Fisman and Gatti 2002).
But many Indonesian political observers have found a perverse logic to decentralization
and regional splitting. Instead of fostering inter-jurisdictional competition, decentralization and
regional splitting have increased the opportunities for local corruption by expanding the number
of independent veto points and government agencies across the country.7 Without the heavy
hand of Soeharto in the background, these agencies are now even more willing to extort bribes
and levies. Local elites interested in securing regular funding from the central government can
create what amount to personal fiefdoms in new sub-provincial jurisdictions. The logic is similar
to that of Shleifer and Vishny (1993), who suggest two different institutional equilibria that
support corruption. In one, a strong central government has an incentive to maximize its total
take in bribes from an economy, and hence punishes its lower level representatives in the regions
if they levy bribes to an extent that they discourage growth and investment. Such an institutional
structure leads to a high total number of bribes taken, but a relatively small average bribe, and
New Order Indonesia matched this model well (see MacIntyre 2000, 2003). An alternative
institutional structure has no central apparatus that can coordinate bribery and corruption among
bureaucrats or government agencies throughout a country. The lack of coordination among bribe
takers implies that the total amount of bribery may be lower than under a centralized regime, but
that each individual bribe will be larger than under the centralized regime. The implication for
investment, growth, and development is that centralized corruption, while inefficient, is more
efficient than decentralized corruption. There are now higher transactions costs to negotiating
contracts and getting investment approval—without central coordination, it is less clear who to
bribe, how much to bribe, or whether each bribe paid will be the last. For this and related
7
Interview with an official at an international development agency in Jakarta, March 2006.
reasons, many observers consider the welfare-enhancing effects of regional splitting and
decentralization to be ambiguous, if not negative.8
This perspective suggests a tantalizing hypothesis about the overall effect of
decentralization on long-run economic growth. Could Indonesia’s decentralization actually be
harmful to long-run growth by decoupling the many opportunities for bribery and extortion in the
Indonesian economy from a strong, centralized leader? Consider first the trends in perceived
corruption over time. Indonesia has always been one of the world’s most corrupt countries,
consistently registering at the bottom of cross-national indices of corruption. Transparency
International always places Indonesia in the bottom quartile of all countries, similar to many
countries in Central Asia and many emerging markets in sub-Saharan Africa. On a scale of 1-10,
with one the most corrupt and 10 the least, Indonesia averages around 2 (Table 1).
Table 1: Indonesia, Corruption Scores, 1995-2005
Source: Transparency International
1995
1.9
8
1996
2.7
1997
2.7
1998
2.0
1999
1.7
2000
1.7
2001
1.9
2002
1.9
2003
1.9
2004
2.0
2005
2.2
See e.g. “Potret lima tahun pemekaran daerah,” Jawa Pos, November 21, 2005; “Semakin menjauh dari
kesejahteraan rakyat,” Kompas, March 3, 2006; “Desain tak matang, desentralisasi jadi beban,” Kompas, March 20,
2006; Toto Suryaningtyas, “Laju otonomi dalam kekangan peraturan,” Kompas, March 20, 2006; “Wakil Rakyat,
mari korupsi lewat celah UU,” Kompas, April 6, 2006; “Revisi PP Pemekaran Daerah,” Kompas, May 17, 2006.
An interesting trend is apparent in the data. While Indonesia has transitioned to democracy and
adopted a wide-ranging program of decentralization, and while Indonesia is slowly improving
from the valley of 1.7 in 1999 and 2000, Transparency International rates it as more corrupt in
2005 than in 1996; that is, Indonesia has yet to recover to even its pre-crisis level of corruption.
We can compare the time trend in corruption to investment approvals per year (Figure 3).
140000
120000
100000
Domestic
Investment
80000
Foreign
Investment
60000
40000
20000
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Figure 3: Indonesia, Domestic and Foreign Direct Investment Approvals, in Billions of Rupiah, 1993-2005
Source: Bank Indonesia
Both foreign direct investment and domestic investment in Indonesia remain much lower in the
wake of the crisis they were before the crisis. In a highly open, export-oriented economy such as
Indonesia, this fall in investment is likely the single greatest cause of the country’s slower
economic growth in the wake of the crisis. For example, the government revealed in March
2006 that of ninety crucial infrastructure projects for which the government has sought tenders,
less than twenty percent had attracted any attention from investors. Shortly thereafter, World
Bank President and former US Ambassador to Indonesia Paul Wolfowitz stated that corruption
was the single greatest hindrance to investment in Indonesia.9
9
“Proyek didanai utang bakal terganggu,” Bisnis Indonesia, March 8, 2006; “Korupsi hambatan terbesar investasi,”
Bisnis Indonesia, April 11, 2006.
There are many reasons to be wary of generalizing from this simple correlation between
stubbornly persistent corruption and the failure of investment in Indonesia to rebound in the
decade after the Asian Financial Crisis. Cross-national data on corruption is notoriously
unreliable, and the movements in the Transparency International series are quite small when
compared to the overall range of possible scores. Moreover, there are certainly other factors that
have influenced investment decisions in Indonesia, in particular the rise of China, India, and
Vietnam as low-cost competitors for foreign direct investment. Additionally, as noted in the
introduction, the breakdown of the New Order gave rise to open secessionist conflicts in three
different provinces, and terrorists have attacked foreign interests in Java and Bali; such political
strife has certainly given domestic and foreign investors pause.10 Since democratization,
moreover, labor has been free to organize for better wages and working conditions, which may
have driven away some investors who formerly enjoyed Indonesia’s controlled labor force.11
But other characteristics of post-Soeharto Indonesian politics suggest that
decentralization has not been as successful as many hoped in attracting investment. Since his
election, SBY’s administration and Indonesian business groups have repeatedly exhorted
provincial and sub-provincial governments to adopt streamlined investment regulations.12 In
10
Stefanus Osa, “Investasi di tengah ketidakpastian,” Kompas, March 18, 2006.
“Pengusaha tak rugikan buruh,” Kompas, March 29, 2006; “Solusi soal buruh dirumuskan,” Kompas, May 8,
2006. Survey evidence, though, suggests that labor activism and labor regulations are not the culprit for decreased
investment; see “Regulasi tenaga kerja bukan faktor dominan,” Kompas, March 20, 2006.
12
“Belum ada visi untuk Indonesia Inkorporasi,” Kompas, February 13, 2006; “Paket deregulasi investasi
diluncurkan,” Bisnis Indonesia, March 1, 2006; “Tidak ada jalan pintas membangun bisnis,” Kompas, March 1,
2006; “Permudah semua urusan,” Kompas, March 9, 2006; “Pemerintah ikut andil dalam perda bermasalah,”
Kompas, March 10, 2006; “Pemda agar tinjau perda di sektor perdagangan,” Bisnis Indonesia, March 13, 2006;
“Kadin desak elit politik ciptakan ketenangan usaha,” Bisnis Indonesia, March 23, 2006; “Dibentuk, tim kaji korupsi
di daerah,” Kompas, March 25, 2006; “Perda di Bengkulu bebani pengusaha,” Bisnis Indonesia, March 27, 2006;
“SBY: Banyak anggaran daerah konsumtif,” Bisnis Indonesia, March 29, 2006; “Pelaporan perda masih minim,”
Kompas, March 29, 2006; “393 Perda bermasalah akan dibatalkan,” Kompas, April 6, 2006; “Praktik premanisme
bebani pengusaha di daerah,” Bisnis Indonesia, April 6, 2006; “‘Paradigma pemda soal investor harus diubah’,”
Bisnis Indonesia, May 9, 2006; “Reformasi pemda harus dipercepat,” Kompas, May 12, 2006; “‘Paket insentif
Oktober belum berjalan’,” Bisnis Indonesia, May 17, 2006. For more encouraging views, see “Pemda mulai
11
April 2006, the central government announced two new regulations to facilitate regional growth,
permitting regions to designate special economic zones without central government approval and
forbidding regions from imposing any new taxes, and yet while regions can now issue permits to
foreign direct investors, they must still seek approval from the central government.13 The fact
that SBY and his Cabinet members continue to prevail upon regional administrations to embark
on such reforms, and that the central government continues to shoulder the responsibility for
creating a good investment climate for needed infrastructural investment through pro-investment
regulations, indicates that decentralization itself is not yet having its desired impact.14
There are, then, two seemingly opposing claims. At the provincial and sub-provincial
level, decentralization seems to be associated with lower corruption, but at the national level the
country is as corrupt as ever, and the investment climate remains unattractive. One promising
way to square these claims comes from Henderson and Kuncoro’s (2006) finding that only when
Islamic parties win local elections does local corruption decline. Islamic parties such as Partai
Keadilan Sejahtera (The Prosperous Justice Party) have a reputation as being less corrupt than
other Indonesian political parties, and the mechanism through which they attract voters may be
less their Islamist message than their commitment to government that is “clean and caring”
(bersih dan peduli). If this is the case, then it suggests that at least in Indonesia, what makes
decentralization effective is not inter-jurisdictional competition itself, but its combination with
membenahi birokrasinya”, Kompas, April 11, 2006; “‘Iklim usaha di daerah membaik’,” Bisnis Indonesia, May 23,
2006.
13
“Daerah bisa bangun kawasan khusus,” Bisnis Indonesia, April 12, 2006; “Pemerintah daerah dilarang terbitkan
perda pajak baru ,” Kompas, April 13, 2006; “Pemda boleh keluarkan izin investasi,” Bisnis Indonesia, April 17,
2006; “Standar izin investasi berlaku nasional,” Bisnis Indonesia, April 18, 2006.
14
“Paket insentif segera keluar,” Bisnis Indonesia, February 17, 2006; “Paket kebijakan infrastruktur,” Kompas,
February 18, 2006; “BI: Rp708 triliun untuk menggerakkan ekonomi,” Bisnis Indonesia, February 22, 2006;
“Pemerintah luncurkan paket kebijakan investasi”, Kompas, March 3, 2006; “Mendag keluarkan 8 aturan baru,”
Bisnis Indonesia, March 31, 2006; “Swasta diajak ikut di zona ekonomi”, Kompas, March 31, 2006; “Bappenas: izin
investasi akan kembali ke daerah,” Bisnis Indonesia, April 11, 2006; “‘Informasi investasi di daerah minim’,” Bisnis
Indonesia, April 21, 2006; “‘Daya saing Indonesia masih rendah’,” Bisnis Indonesia, May 5, 2006; “Masih ada
instansi tak rela melepaskan kewenangan”, Kompas, May 24, 2006; interview with Aburizal Bakrie, Coordinating
Minister for People’s Welfare, March 14, 2006.
local democracy and rotation of power. This still, however, leaves unexplained why
decentralization and rotation of power have so far not led provinces to improve their investment
climates. Perhaps the safest conclusion about Indonesia’s transition to democracy and the move
to decentralization and regional autonomy is that their beneficial effects, at least until now, have
been small and delayed. Provinces and sub-provincial administrations have been slow to adopt
reforms that attract investment and combat Indonesia’s (relatively) high cost economy.
Moreover, the level of corruption in Indonesia is still worrisome, and there is wide agreement
among Indonesians that corruption is greatest threat to Indonesia’s macroeconomy.
At the national level, decentralization cannot solve the problem of corruption, and
Indonesian political leaders recognize that doing so requires firm action by the central
government. There have been some encouraging steps. Successive governments have
empowered supervisory agencies such as the Capital Market Supervisory Agency, the Finance
and Development Supervisory Agency, and the Office of Public Accounts to combat financial
improprieties, and reform of the country’s clumsy and corrupt tax collection agencies remains a
high government priority. Yet many question these institutions’ ability to execute their tasks
because of a lack of legal protection and unclear regulations.15 On corruption, Gus Dur and
Megawati each created coordinating bodies to combat corruption, collusion, and nepotism, the
most influential among them being the Corruption Eradication Commission, formed in 2002.
SBY’s government has staked its reputation on eradicating corruption, and has created two new
bodies, the Corruptors’ Search Team in 2004 and the Coordinating Team for the Eradication of
Corrupt Practices in 2005. But results have been slow, with overlapping responsibilities, limited
15
“Pembentukan komisi independen pajak dipercepat,” Bisnis Indonesia, February 8, 2006; “IMF desak RI
reformasi pajak ,” Bisnis Indonesia, February 20, 2006; “‘Peran KAP ungkap korupsi masih minim’,” Bisnis
Indonesia, June 1, 2006.
protection for witnesses, and a lack of coordination among the several extant anti-corruption
agencies hindering successful prosecution of suspects (see Yuntho 2005b).16
While the Indonesian press issues new reports of corruption investigations almost daily,
there are frequent criticisms that the most corrupt and politically connected figures escape
prosecution.17 The on-going Bank Indonesia Liquidity Support scandal—referring to the
massive amount of liquidity support doled out to cronies controlled banks at the height of the
crisis—has yet to reach much of a conclusion. Some of the biggest corruptors simply vanished
overseas, and others arranged to have their repossessed assets overvalued by government
auditors in order to minimize their losses (Mintorahardjo 2001: 25-53; Yuntho 2005a).18 In other
areas, despite several high profile cases in which corrupt politicians and businessmen have been
convicted, the deterrent effect of national anti-corruption efforts seems minimal. For instance,
Soeharto’s third son Tommy (Hutomo Mandala Putra) was sentenced in 2001 to eighteen months
in prison for corruption, but for months he avoided detention. His corruption conviction was
overturned, but not until after he masterminded the revenge killing of the Supreme Court Justice
M. Syafiuddin Kartasasmita (who had presided over his first trial), a crime for which he was
sentenced to fifteen years in prison. Tommy has served his sentence with relative ease, using
funds from his Humpuss Group to build a badminton court on prison grounds, receiving
extended visits from models, periodically using complaints of stomach pain to seek respites from
16
“KPK usul satukan pengadilan yang dua jalur,” Kompas, February 22, 2006; “Saksi pelapor bisa bebas,” Kompas,
March 17, 2006.
17
“Presiden bantah berantas korupsi secara tebang pilih,” Kompas, February 6, 2006; “Tebang pilih karena
kepentingan politik,” Kompas, February 16, 2006; “Pengadilan korupsi versus pengadilan umum,” Kompas, March
1, 2006; “Pemerintah dinilai tidak konsisten berantas korupsi,” Kompas, April 19, 2006.
18
“Korupsi BLBI gotong royong,” Kompas, May 23, 2003; “Six tycoons to have their BLBI cases closed,” Jakarta
Post, July 28, 2004; “Tim baru akan urus aset bodong,” Kompas, February 6, 2006; “Mengungkit kembali penjualan
aset BPPN”, Bisnis Indonesia, February 8, 2006; “Baru dua obligor serahkan dokumen,” Kompas, May 5, 2006;
interview with Yosef Ardi, Reporter for Bisnis Indonesia, March 6, 2006. Some allege that debtors have used
personal connections with SBY to protect their assets: “Debtor ke Istana, itu tidak etis,” Kompas, February 10, 2006.
incarceration, and repeatedly earning sentence reductions.19 Were it not for Tommy’s decision
to murder a judge, he would be free today, like his famously corrupt sister Tutut and his father,
who has been repeatedly deemed too ill to stand trial.
Under SBY, whose administration has undoubtedly done more to combat corruption than
its predecessors, a troubling new trend is the bribery of legal officials associated with corruption
investigations. Credible reports appear periodically that members of the Corruption Eradication
Commission have accepted bribes and intimidated witnesses.20 Soeharto’s half-brother,
Probosutedjo, confessed to bribing Chief Justice Bagir Manan, who presided over his corruption
trial in 2003. Since then, prosecutors have brought charges against several Supreme Court
employees, but Bagir remains untouched in the wake of jurisdictional spats between the Supreme
Court and the Corruption Eradication Commission.21 A similar case involves Achmad Djunaidi,
who as president of the state-owned workers’ insurance cooperative PT Jamsostek oversaw a
number of shady investment deals that ultimately cost the Indonesian government more than Rp
200 billion (around US$21.6 million). Upon being sentenced to eight years in prison in April
2006, Achmad revealed that he had paid Rp 600 million (around US$65,000) to government
lawyers as a bribe to avoid jail time.22 Two attorneys in the Attorney-General’s office have been
dismissed, and may face questioning from the Corruption Eradication Commission, but the
19
“Soeharto’s son builds badminton court in jail,” Sydney Morning Herald, October 1, 2003; “Model banned from
visiting Tommy,” Jakarta Post, August 6, 2004. Tommy’s lawyer Elsa Syarif, who helped hide him from police in
2001, has not been charged with any wrong-doing; “Police declare Adrian’s lawyer a suspect,” Jakarta Post,
October 6, 2004.
20
“AKP Suparman mulai diadili,” Kompas, May 31, 2006.
21
“Suharto’s half-brother faces 4-year jail term in fraud case,” Asian Wall Street Journal, April 23, 2003; “Judge’s
arrest a long time coming,” Jakarta Post, January 11, 2006; “Kasus suap di MA diajukan ke pengadilan”, Kompas,
February 10, 2006; “Harini akui bertemu sendiri dengan Bagir Manan”, Kompas, March 10, 2006; Susana Rita,
“Peradilan tetap saja korup,” Kompas, May 24, 2006; “Why it’s so difficult to eradicate corruption in Indonesia,”
Jakarta Post, May 24, 2006.
22
“Mafia hancurkan peradilan,” Kompas, April 29, 2006; “Jaksa dituding terima uang,” Kompas, April 29, 2006;
“Tim Tastipikor tangani dua jaksa ‘nakal’,” Kompas, May 20, 2006.
blatant nature of the corruption involved raises concerns about the SBY administration’s ability
to prosecute corruption cases successfully.
In sum, we can draw several conclusions about the post-Soeharto Indonesian political
economy. Government-business relations remain extremely close, and many of the big pribumi
entrepreneurs from the New Order have risen in the government. But the institutional context of
government-business relations has changed with decentralization and democratization. The
national government must now negotiate with provincial governments, few of which have made
great strides in improving the local investment climate. Corruption is now decentralized, and
perhaps more growth retarding than corruption under the New Order. There is tentative evidence
that local corruption has decreased with decentralization and local political competition, but at
the national level it still remains the greatest threat to Indonesia’s macroeconomic stability, even
given the SBY administration’s attempts to bring corrupt politicians and business figures to
justice. Perhaps ironically, these vulnerabilities are what will probably shield Indonesia from the
same sort of meltdown that it experienced in 1997-1998, as foreign and domestic investors are
far more hesitant to invest in Indonesia than in the mid-1990s. Indonesia’s vulnerability is now
of a different sort: that of a low-investment, low-growth equilibrium that undoes public support
for democracy and regional autonomy.23
4.
Malaysia: Institutional Continuity and Macroeconomic Vulnerability
Economic recovery in concert with political repression allowed Mahathir’s regime to
withstand a political challenge from Anwar and a newly galvanized political opposition. The
engine of this political opposition was Malaysia’s reformasi movement, which championed the
causes of reform and social justice and catalyzed the formation of the Barisan Alternatif
23
See recent data from Mujani (2006) for evidence that Indonesia’s slow growth negatively influences Indonesians’
support for democracy.
(Alternative Front, BA), an electoral coalition among the Pan-Malaysian Islamic Party (PAS),
the largely Chinese Democratic Action Party (DAP), and the pan-ethnic National Justice Party
(Keadilan) founded by Anwar’s wife Wan Azizah Wan Ismail. In the 1999 general elections,
PAS captured an additional state legislature for a total of two out of thirteen, and expanded its
small share of seats in Malaysia’s lower house. Yet the ruling Barisan Nasional (National Front,
BN) coalition, led by UMNO and Mahathir, easily retained the two-thirds majority in the lower
house that it had enjoyed since the suspension of democracy in 1969. In the wake of the BN’s
victory, Mahathir moved against many of his political opponents (Abbott 2004: 80-81;
Committee to Protect Journalists 2000; Netto 1999), reinforcing his firm grip over Malaysian
politics and society. Mahathir continued to rule until 2003, when he handed the reigns of power
to Deputy Prime Minister Abdullah Ahmad Badawi. Abdullah led the BN to an overwhelming
victory in the 2004 general elections, reaffirming UMNO and the BN’s position at the apex of
Malaysia’s regime.
This political continuity means that at the institutional level, Malaysia’s political
economy has changed little between 1996 and 2006. On one hand, this has provided a boon to
investment (Figure 4), as foreign and domestic companies continue to be attracted to the
country’s relative political stability and quiescent labor force.
35000
30000
25000
Domestic Investment
20000
Foreign Investment in Approved
Projects
15000
10000
5000
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Figure 4: Malaysia, Domestic and Foreign Direct Investment (in Millions of Ringgit), 1993-2004
Source: Ministry of Finance
The data show that like in Indonesia, foreign investment declined in 1997, but unlike Indonesia,
has since recovered to beyond pre-crisis levels. The spikes in domestic investment reflect
expansionary fiscal policies launched by the government in 1998 and again in 2001. But in
contrast to this favorable picture of investment recovery which has driven Malaysia’s post-crisis
economic growth, political continuity in Malaysia means that there has been little meaningful
reform in the policy areas that contributed to the country’s macroeconomic vulnerability in the
late 1990s.
Table 2: Malaysia, Corruption Scores, 1995-2005
Source: Transparency International
1995
5.3
1996
5.3
1997
5.0
1998
5.3
1999
5.1
2000
4.8
2001
5.0
2002
4.9
2003
5.2
2004
5.0
2005
5.1
As measured by Transparency International, for example, Malaysia is almost precisely as corrupt
in 2005 as it was in 1995—although, like Indonesia, corruption worsened in the wake of the
country’s economic crisis before making a modest recovery.
The increase in corruption from 1999 through 2002 stems largely from measures that the
regime took to foster economic recovery. While capital controls and expansionary
macroeconomic policy allowed the regime to jumpstart economic growth, they also allowed the
regime to rescue politically connected firms without the fear of punishment from foreign traders.
To resolve outstanding issues of corporate debt and weak financial institutions, the government
created two quasi-governmental bodies tasked with acquiring non-performing loans and injecting
capital into weak banks (Danaharta and Danamodal). A Corporate Debt Restructuring
Committee facilitated these tasks (see Mahani 2002). But there was clear evidence of favoritism
in these bodies’ operations. The government bought out shares in the deeply indebted Malaysian
Airlines Systems from Tajudin Ramli, a corporate ally of former Finance Minister Daim
Zainuddin, at an inflated price that allowed Tajudin to pay off his own extensive debts.24 The
government also bought a controlling stake in Time dotCom Bhd, using public funds to
complement private investment after a failed initial public offering.25 Time dotCom is a
subsidiary of Time Engineering Bhd, in turn controlled by the government-linked conglomerate
Renong Bhd, which had long been one of UMNO’s corporate arms. Just six months later, after a
falling out between Mahathir and Daim, the government bought a controlling stake in Renong,
which itself remained mired deeply in debt.26 Such examples abound of Mahathir’s regime using
public funds to protect political interests during this period of recovery. Johnson and Mitton
(2003) find that the stock prices of publicly listed companies with links to Mahathir recovered
faster than stock prices of unaffiliated firms, and that both recovered faster than stock prices of
firms associated with Anwar.
The onset of Abdullah’s tenure in office was a moment of optimism for many observers
of Malaysian politics (Welsh 2005). Under his leadership, the final remnants of Malaysia’s
radical adjustment measures—bans on short-selling of stocks and the ringgit’s hard peg to the
24
“MAS rescue faces a difficult course,” Asian Wall Street Journal, January 17, 2001.
“Malaysian funds buy costly stake in Time dotCom,” Asian Wall Street Journal, March 16, 2001.
26
Terence Gomez, “Malaysia Inc.: Bailout or accountability?,” Asian Wall Street Journal, July 26, 2001.
25
US dollar—have been lifted. He has a reputation of being personally incorruptible, and he
immediately embarked on an ambitious program to streamline government-linked companies
(GLCs) and root out public sector inefficiency. On these counts, he can claim some modest
success, having introduced procurement standards and efficiency guidelines and replaced
ineffective executives in some GLCs.27 Yet close examination of Malaysian politics and
economic management shows that the tight relationship between business and politics persists.
Several promised reforms have yet to come to pass, such as the establishment of an open tender
system for government procurement and a fair competition law.28 While the late 1980s saw
official privatization of many companies, the government retains a large stake in conglomerates
in key sectors. Some government-controlled firms such as Telekom Malaysia Berhad
(telecommunications) and Petronas (petroleum exploration and refining) are notably professional
and have expanded beyond Malaysia’s borders, but others such as Tenaga Nasional Berhad
(power generation) have retained their influence through size rather than efficiency.29
Furthermore, political favoritism granted to clearly inefficient companies such as the national
automobile company Proton persists, reflecting both the continued influence of Mahathir on
daily politics (he is now Proton’s “special advisor”) and Abdullah’s inability to combat
entrenched interests.30
27
“Professional managers,” New Straits Times, February 20, 2004; “PM: we must be thrifty,” The Star, March 7,
2006; “Committee: GLCs must stress more on transparency,” The Star, March 10, 2006; “Taking efficiency to the
highest level,” New Straits Times, April 2, 2006; “Manuals to help boost performance of govt-linked firms,”
Business Times, April 26, 2006; “PM: Better procurement can save GLCs billions,” New Straits Times, April 27,
2006; “Star rating to assess ministries’ services,” New Straits Times, May 2, 2006. There has been some discussion
of further rounds of privatization, but this is unlikely to occur in the near future; “Khazanah kaji kemungkinan GLC
jadi firma persendirian,” Berita Harian, March 24, 2006; “9MP: initiative for privatisation,” The Star, April 1, 2006.
28
“Malaysia risk: legal & regulatory risk,” Economist Intelligence Unit – Risk Briefing, May 23, 2006. Interview
with Lim Kit Siang, DAP MP, July 12, 2006; interview with Tan Sri Ramon Navaratnam, President of Transparency
International (Malaysia), July 17, 2006.
29
“Tenaga stock may be capped at current levels,” Asian Wall Street Journal, October 6, 2004; “Tarif baru elektrik
tidak jejaskan rakyat miskin,” Berita Harian, March 4, 2006; “Mounting woes for TNB,” April 12, 2006.
30
“Proton terus dibantu,” Berita Harian, March 24, 2006; “Cheaper Protons,” New Straits Times, March 25, 2006;
“Proton pledges to reduce defects,” The Star, April 6, 2006.
From the standpoint of UMNO’s leadership, control over budgetary purse strings has
reached paramount importance. As part of his strategy to sideline Anwar, Mahathir took
temporary control of the Ministry of Finance, and later gave the Finance portfolio to his longtime ally Daim Zainuddin, a Malay businessman who built his billion dollar fortune through a
close association with UMNO leaders and who had previously occupied this position from 1984
to 1991. Daim served until 2001, when Mahathir assumed the position himself. Daim ostensibly
resigned on his own accord, but political observers have noted that Daim’s business interests had
come into conflict with the business interests of Mahathir’s son Mokhzani Mahathir.31 Since
rising to the position of Prime Minister, Abdullah has continued Mahathir’s practice of holding
the Finance portfolio. Also of note is the continued existence of the National Economic Action
Council (NEAC), a super-constitutional organ that Mahathir created in late 1997 to find a
solution to the country’s economic crisis. Although the crisis has long since abated, the NEAC
continues to exist as a body with wide discretionary authority over economic management,
superseding that of economic ministries such as Trade and Industry, Public Works, Finance, and
others. At the head of its Executive Committee sits the Prime Minister, the Deputy Prime
Minister, and an executive chair who also serves as Minister in the Prime Minister’s Department.
If anything, this is evidence of more political centralization of economic policy formation than
under Mahathir’s rule before the crisis.
Besides maintaining the high level of centralization in economic policy making, Abdullah
has retained a number of Mahathir’s cronies who had under Mahathir served as members of his
economic team. Rafidah Aziz, a long time Mahathir loyalist with several corruption scandals
already under her belt, remains Abdullah’s Minister of International Trade and Industry. S.
Samy Vellu, President of the BN’s Indian component party the Malaysian Indian Congress and a
31
See Terence Gomez, “Why Mahathir axed Daim,” Asian Wall Street Journal, July 5, 2001.
figure long noted for his egregious use of patronage to secure office,32 has retained his influential
position as the Minister of Public Works. Abdullah has retained other figures as well, leading
many observers to question Abdullah’s independence from the UMNO party machine.33 Such
continuity of Malaysian politics reveals that despite Abdullah’s reputation as a clean politician
without crony linkages to the business community, opposition from entrenched interests in
UMNO and the BN makes it unlikely that he will introduce wide ranging and effective reforms.
Moreover, Abdullah’s son-in-law Khairy Jamaluddin, viewed as having extraordinary personal
influence over Abdullah, has seen his personal wealth grow extensively since 2004 at what many
believe to be shady investment deals dependent on political favoritism.34 Additionally,
Abdullah’s deputy Najib Abdul Razak has none of Abdullah’s reputation for moderation and
clean government. Instead, he is known as a staunch defender of Malay special rights and of
UMNO, and is often identified with the politics of his father, Abdul Razak Hussein, who
engineered the move toward overt UMNO dominance of Malaysian politics during the period of
suspended democracy from 1969-1971.
If the personal inclinations of power holders (aside from Abdullah) are less than
encouraging, developments in the government’s intervention in the economy reveal that the main
institutional weaknesses of the Malaysian government have persisted as well. The regime has
not retreated from its long advocacy of Malay political dominance and favoritism for Malays in
business and society. (In Malaysia, “positive discrimination” officially benefits all bumiputras,
or non-Chinese and non-Indians, but Malays are the main beneficiaries of this favoritism.) A
32
“Troubled run-up to MIC elections,” New SundayTimes, April 16, 2006.
“Despite landslide election, some officials are retained from Mahathir’s regime,” Asian Wall Street Journal,
March 29, 2004; “Malaysia—Not so fast,” Far Eastern Economic Review, April 8, 2004; “Minor Cabinet reshuffle,”
New Straits Times, February 14, 2006; “Mixed reactions from the public on new Cabinet line-up,” The Star,
February 15, 2006.
34
Anonymous interview with a Malaysian economist, July 2006.
33
revealing document is the Ninth Malaysia Plan (Government of Malaysia 2006), Malaysia’s first
five-year development plan issued under Abdullah, which the government released to great
domestic fanfare in February 2006. The Plan, like its predecessors, places heavy emphasis on
the government’s role in coordinating the redistribution of wealth and equity in favor of
bumiputras, largely at the expense of the country’s large Chinese Malaysian minority.35
There are many ways in which the government intervenes in the economy to sponsor
interethnic redistribution, many of which have created macroeconomic vulnerabilities in the past.
For instance, in a worrying continuation of policies long implemented under Mahathir and his
predecessors, the government continues to manage a number of bumiputra-only unit trusts with
heavy involvement in the KLSE. Mahathir himself directed the expansion of government
participation in the stock market in the late 1990s and early 2000s as yet another way to increase
the wealth flowing to Malays in the wake of the country’s financial crisis. Besides the unit trusts
that had existed for years before Malaysia’s crisis (Amanah Saham Nasional and Amanah Saham
Bumiputra), the government subsidiary Permodalan Nasional Berhad (PNB) launched two more
in 2000 and 2001. PNB also manages four unit trusts open to all Malaysians, including Amanah
Saham Wawasan 2020 (launched in 1996) and three others launched between 2000 and 2003.
But even the pan-ethnic government unit trusts reserve many shares for bumiputras at discounted
prices.
Besides PNB’s capital market investments, the government maintains an active interest in
the corporate world in other ways. Khazanah Nasional Berhad, incorporated in 1993 under the
Ministry of Finance, undertakes “strategic investments” in areas such as power generation,
35
“Priority on acquiring a first-class mentality,” The Star, April 1, 2006. One interesting development is that for the
first time Indian Malaysians have been identified as requiring government assistance, “9th Malaysia Plan: Yearly
economic growth of 6 pc,” New Straits Times, April 1, 2006; “Business training for Bumiputeras and Indians,” New
Straits Times, May 23, 2006.
shipping, transportation, and many others. Perbadanan Nasional Berhad (PNS), formerly under
the Ministry of Finance before privatization in 1996, facilitates the growth of a “bumiputra
commercial and industrial community” by investing in bumiputra-controlled start-ups and
distributing franchises to bumiputras. Perbadanan Usahawan Nasional Berhad (PUNB), a
wholly owned subsidiary of Yayasan Pelaburan Bumiputra (of which PNB is another
subsidiary), has since 1991 complemented PNS in nurturing bumiputra entrepreneurs, and its
responsibility for creating bumiputra franchisees and businesses owners expanded notably in the
Ninth Malaysia Plan.36 Below the federal level, State Economic Development Corporations
(SEDCs) perform similar functions within most Malaysian states. A wide array of government
linked coordinating bodies and policy development organizations support these efforts both at
the Federal level and among the Malaysian states.37
The principal-agent danger from such extensive government involvement in the
Malaysian business sector is precisely the same today as it was a decade ago. PNB, Khazanah,
PUNB, the SEDCs, and even PNS are all subordinate to politicians, and despite Abdullah’s vocal
commitment to efficiency and “the national interest,” the politicians that oversee these
government bodies may have interests at loggerheads with that of the Malaysian people, the
firms’ supposed beneficiaries. In the past, politicians have influenced national investment
companies to invest in uneconomical business ventures connected to political allies.
Additionally, because the regime has such a direct stake in the performance of Malaysian stocks,
it has a strong incentive to protect dividends at all costs. From the perspective of the recipients
of patronage, political favoritism breeds moral hazard. And while many governments across the
36
37
“2,420 perniagaan diwujud,” Berita Harian, May 2, 2006.
“Insken, MPUD mampu mempercepat kuasai ekonomi,” Berita Harian, May 24, 2006.
world have quasi-corporate subsidiaries that facilitate strategic national investments, the danger
in Malaysia comes from the country’s weak regulatory apparatus.
Regulatory weaknesses are the result of technical incompetence, but rather of the
vulnerability of supervisory agencies to political interference. Bank Negara Malaysia,
Malaysia’s Central Bank, is by no means independent from political influence (during the 1998
crisis political pressure led its Governor and Deputy Governor to resign). Agencies of public
accountability such as the Anti-Corruption Agency (ACA), the Federal Courts, and the Electoral
Commission (EC) remain subordinate to high UMNO office holders. The ACA has the statutory
authority to investigate and prosecute a wide number of offenses among public servants, but in
practice, it is successful against only low-level functionaries.38 The Malaysian judiciary,
stripped of independent authority by Mahathir in the late 1980s but tentatively reasserting its
independence since 2004, still under Abdullah faces not infrequent accusations of bowing to
political pressure and bribery.39 The Electoral Commission still encounters widespread criticism
from opposition parties and NGOs, most recently for shady voter registration practices in
Sarawak’s 2006 state elections.40 In the 1980s and 1990s, such weak regulatory bodies fostered
the growth of corruption and money politics, and observers uncovered a number of corporate
scandals tied directly to UMNO and other BN component parties (see Gomez 1994; Gomez and
Jomo 1999; Milne and Mauzy 1999; Searle 1999). During the crisis, Mahathir used these and
other investment arms to protect the interests of favored groups, using for example funds from
Khazanah and the publicly owned pension fund the Employees’ Provident Fund to shore up the
38
“First civil servant to be charged with not declaring assets,” New Straits Times, February 14, 2006; “At the Dewan
Rakyat yesterday: arrests for graft increasing,” New Straits Times, March 21, 2006.
39
“Justice for sale: Are some judges corrupt?,” New Straits Times, May 31, 2006.
40
“Suspend elections, Kit Siang tells EC,” Malaysiakini, May 20, 2006; “Revamp EC, says election watchdog,”
Malaysiakini, May 25, 2006..
sagging KLSE.41 In other words, without prudential oversight, Malaysia’s economy in the 1990s
expanded recklessly, leading to macroeconomic vulnerabilities; today, without meaningful
reform, the same danger exists.
Several recent corporate scandals reveal that political protection remains valuable for
well-connected corporate figures. In the case of Daim Zainuddin, his falling-out with UMNO
power holders appears to have left him particularly vulnerable. In January 2006, the Court of
Appeals ruled that Metramac Corporation Sdn Bhd (formerly Syarikat Teratai K.G. Sdn Bhd),
controlled by Daim’s protégés Halim Saad and Annuar Othman, owed RM65 million to Fawziah
Holdings Sdn Bhd for losses incurred in a scrapped highway construction project from 1990.
Daim as Finance Minister had informed the directors of Fawziah—a main investor in Syarikat
Teratai—that the government had insufficient funds to pay compensation for the project. Halim
and Annuar then purchased Syarikat Teratai for a deflated price, after which Daim announced
that the government would pay the compensation after all. The key to this transaction was Halim
and Annuar’s personal connections to Daim, which allowed them to make tens of millions of
ringgit instantly at Fawziah’s expense.42 Halim, Annuar, and Daim immediately appealed
court’s ruling, and Daim firmly denied that Halim or Annuar had ever benefited from
connections with him during his tenure as the Minister of Finance.43 This statement certainly
conflicts with the many questionable contracts awarded to Halim’s United Engineers (Malaysia)
Berhad, a subsidiary of Renong (see above), throughout the 1980s and 1990s (Gomez 2002: 9195; Jomo 1998: 187). The case has yet to reach a conclusion, but it is revealing that the case
against Daim moved forward only after he fell from political favor.
41
“RM60b sokong BSKL,” Utusan Malaysia, September 4, 1997.
“Metramac to pay RM65m,” New Straits Times, January 13, 2006; “KL politics-business link exposed in court,”
Straits Times, January 16, 2006.
43
“Daim: it was Cabinet’s decision,” The Star, January 27, 2006.
42
Under Abdullah, moreover, political scandals reveal also that the practice of UMNO
politicians using their office for corporate gain remains widespread. In 2005, Mahathir revealed
the extensive use of approved permits (APs) for importing foreign-made automobiles into the
country as important new tool of political patronage. The distribution of APs falls under the
authority of Minister of International Trade and Industry Rafidah Aziz. Mahathir, as Proton’s
advisor, condemned the practice for introducing competition to Malaysia’s heavily protected
domestic automobile industry, and released the names of the beneficiaries of over 67,000 APs
issued in 2004 alone. Despite extensive media coverage, no charges of wrongdoing have been
filed, and Rafidah has retained her position.44 In another scandal, the Malaysian press revealed
in May 2006 that UMNO parliamentarian Mohd Said Yusof had requested that Malacca Customs
and Excise officials “close one eye” to the import of illegal Indonesian sawn logs by a company
that he owned. This is not Mohd Said’s first brush with the authorities over illegal trade, as
customs officials in 1999 charged a company of which he is a director with illegally exporting
pirated VCDs to Indonesia. Yet even though Mohd Said admitted abusing his political power,
the BN refused to endorse an opposition recommendation to refer Mohd Said to the
Parliamentary Privileges committee.45 These political developments lead most observers to
question the true extent to which Abdullah is able to combat corruption and patronage in
Malaysian politics.
So in contrast to the case of Indonesia, in Malaysia we find that institutional continuity
has contributed to a more rapid recovery from the crisis, at the cost of continued if not additional
macroeconomic vulnerabilities. The link between Malaysia’s political system and
44
“Committee fully responsible for APs, says Pak Lah,” The Star, February 18, 2006.
“I asked Customs to close one eye: Jasin MP,” Malaysiakini, May 4, 2006; “Let other agencies investigate,” New
Sunday Times, May 7, 2006; “Mohd Said admits owning Binyu Sof,” New Straits Times, May 11, 2006; “Firm once
hauled up over smut VCDs,” New Straits Times, May 12, 2006; author interview with Datuk Shahrir Abdul Samad,
BN MP for Johore Bahru and former Chairman of the BN Backbenchers’ Club, July 10, 2006.
45
macroeconomic vulnerability is easy to miss in relatively fat times, but it is important to recall
that Malaysia’s economic crisis from 1997-1999 began following a similar period of seemingly
healthy expansion. Like Indonesia, though, the memory of the near-collapse of Malaysia’s
economy still gives foreign investors pause, and risk consultancies continue to warn that the dark
areas of Malaysia’s political economy have persisted under Abdullah. If anything shields
Malaysia from financial and real sector crises today, it is investor wariness, not political and
economic reform.
5.
Conclusions
The experiences of Indonesia and Malaysia after the Asian Financial Crisis reveal the
difficulty of establishing institutions that can sponsor healthy economic growth. Indonesia since
1998 has experienced rapid and far-ranging institutional change towards institutions that
scholarly consensus holds should be both welfare and efficiency enhancing. But its experience
suggests that the benefits of democratization and decentralization can be delayed, both by
extensive corruption and the difficult task of adjusting to these new institutional arrangements.
Malaysia’s experience reaffirms what many consider an uncomfortable common wisdom that
despite their high costs in terms of personal freedoms, selective repression and autocratic
political stability can be a platform for economic recovery. In both countries, corruption and
government-business linkages remain the greatest source of macroeconomic vulnerability, and
the level of corruption in 2005 in each is the same as it was before the Asian Financial Crisis.
But corruption has changed in Indonesia from a highly centralized system of hierarchical
exchange to a decentralized system of bribery and influence peddling. In Malaysia, the main
players have changed with the resignation of Mahathir, the marginalization of Anwar and Daim,
and the rise of Abdullah and Khairy, but the system has proven remarkably resilient.
If the discussion here appears pessimistic, one welcome sign in both countries is the rise
of an active civil society. Civil society in these two countries plays a vital role in monitoring
government excesses and agitating for reform. Hundreds of NGOs have sprung up in Indonesia
to agitate for clean government, such as the influential Indonesian Corruption Watch which has
taken the lead in tracking and publicizing cases of corruption.46 In Malaysia, draconian
legislation that restricts civil society organizing remains in effect, but opposition presses and
NGOs energized by the country’s reformasi movement still vocally criticize the BN regime, and
even the government-controlled print media have become bolder in covering political and
economic scandals since 2004. While evidence of its impact on policies that minimize
macroeconomic vulnerability remains scarce, the ability of nascent civil society groups to help
improve government accountability to popular demands for clean and responsible government
may be the key to fostering macroeconomic stability and healthy long-run economic growth in
Indonesia and Malaysia.
6.
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2003.
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UMNO Polls. Aliran Monthly 19 (11/12):2-6.
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Oligarchy in an Age of Markets. London: RoutledgeCurzon.
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Leonards, NSW: Allen & Unwin.
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[Accessed June 1, 2006].
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Available online at http://www.antikorupsi.org/docs/timtastipikoreson.pdf [Accessed
May 24, 2006].
Iron Cage in an Iron Fist: Authoritarian Institutions and the Personalization of Power in
Malaysia
Author(s): Dan Slater
Source: Comparative Politics, Vol. 36, No. 1 (Oct., 2003), pp. 81-101
Published by: Ph.D. Program in Political Science of the City University of New York
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Iron Cage in an Iron Fist
of Powerin
Institutionsandthe Personalization
Authoritarian
Malaysia
Dan Slater
"The individualbureaucrat....isonly a single cog in an ever-movingmechanism
which prescribesto him an essentially fixed route of march.The official is entrusted
with specialized tasks and normallythe mechanism cannotbe put in motion or
arrestedby him, but only from the very top."
Max Weber1
"Contraryto the usual belief that I am a dictator,I actuallywork as a team."
MahathirMohamad2
Democraticinstitutionshave long enjoyed pride of place in comparativepolitics. By
comparison,authoritarianinstitutionsremain inadequatelyconceptualized,theorized,
and investigated. To help narrow this gap, this article assesses the conceptual and
theoretical implications of a puzzling phenomenon: Malaysian Prime Minister
MahathirMohamad'sgrowing personalizationof power since the mid 1980s.
This phenomenon is particularlypuzzling because Malaysia has long represented
one of the most institutionalizedparty-statesin the developing world, and personalization is typically seen as antitheticalto institutionalization.3While this conventional wisdom makes a great deal of sense in democracies, it is misleading in polities
that exhibit significant authoritariancharacteristicssuch as Malaysia.4This distinction has importantimplicationsin understandinghow and why authoritarianregimes
change, remain stable, or collapse.
Since democratic and authoritarianinstitutions serve very different purposes,
institutionalizationhas very different implications in democratic and authoritarian
contexts. Democratic institutions fundamentallyserve to provide stable patterns of
popularrepresentation.One way they accomplish this purpose is by constrainingthe
chief executive's "despotic power,"which in the terminology of Michael Mann is
"the range of actions" that an individual leader "is empoweredto take without routine, institutionalized negotiations" with other regime members.5 In democracies,
therefore, personalization is antithetical to institutionalization by definition.
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ComparativePolitics
October2003
Democracies can either be institutionalized,if rules constrainthe ruler, or personalized, if rulersignore the rules.
Highly institutionalized authoritarianregimes also typically exhibit regularized
succession mechanisms and collective decision-making procedures that curtail a
ruler's personal power. But they are neither the sole nor the primary purposes of
authoritarianinstitutions. Whereas democratic institutions serve to provide predictable patternsof representation,authoritarianinstitutions primarilyserve to provide a stable basis for domination.6The raison d'etre of authoritarianinstitutionsis
not to constrain "despotic power,"but to supply a regime with the "infrastructural
power"necessary to implement its command over potential opposition in civil society and within the multiple layers of the state apparatusitself.7 While democratic
institutions serve to keep the executive in check, authoritarianinstitutionsserve to
keep political opposition underwraps.
Personalizationand institutionalizationare thus not as antitheticalin authoritarian
regimes as in democracies. Despotic power (the power to decide) can become highly
personalized,even as infrastructuralpower (the power to implement)remainshighly
institutionalized.Institutionsto curtail the chief executive may falter while institutions to curtailpolitical oppositionremainformidable.
This reconceptualizationof authoritarianinstitutionshelps addressa centraltheoretical puzzle. How can an aspiringautocratpersonalize power in the face of powerful preexisting institutions?8In other words, why would a bureaucratic"iron cage"
fail to keep an autocratic"iron fist" in check? If political institutionsare conceived
as procedural checks on the executive, personalization can occur only when a
regime's institutionsare weak. But once authoritarianinstitutionsare gearedprimarily toward extending a regime's infrastructuralpower, personalization might take
place when a regime's key institutionsare strong.Aspiring autocratscan not do their
own dirty work; they need infrastructuralpower, embodied in regime organizations,
to execute their commands.Therefore,in authoritarianregimes, high levels of infrastructural power facilitate the effective concentration of despotic power.
Institutionalizationalong one dimension ironically abets deinstitutionalizationalong
another.
Recent events in Malaysia provide strong evidence in supportof this proposition.
Because of its high antecedent level of institutionalization, Malaysia provides an
ideal case to challenge the assumptionthat personalizationsignifies the underdevelopment of political institutions.9MahathirMohamad has confounded this conventional wisdom by establishinghighly personalizedcontrol over decision-makingprocedures in the Malaysian party-state. More specifically, Mahathirhas used three
mechanisms of personalization-packing, rigging, and circumventing-to transform
what was long described as a semidemocratic single party regime into something
more closely resemblingpersonalizedauthoritarianrule.
Mahathirhas personalized power as much by deploying Malaysia'sauthoritarian
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Dan Slater
institutions as by destroyingits democraticones, however.To the extent that institutions such as parliament,the judiciary,the cabinet, the bureaucracy,the sultans, the
media, the police, and the ruling party (the United Malays National Organization,or
UMNO) have historically served as democratic institutions-as procedural checks
on despotic executive power-they have clearly been weakened.10But to the extent
that these institutions historically served as authoritarianinstitutions-as the partystate's organizationalbasis for political control over potential opposition, including
dissent from within the party-stateitself-they have served as much as Mahathir's
accomplices as his victims.
Moreover, Malaysia's political institutions have long acted, at least in part, as
vehicles for top-down control. Even before MahathirtransformedMalaysia into a
system of "pseudo-democracy"or "competitive authoritarianism"in the late 1990s,
Malaysia was never considered fully democratic.11Rather, it was characterizedby
knowledgeableobserversas a "quasi-democracy,"a "semidemocracy,"a "repressiveThe Malaysian partyresponsive regime," or a system of "soft authoritarianism."'2
state'skey institutionshave thereforeplayed a complex and dynamic combination of
democraticand authoritarianroles for nearly five decades.
Thus, when Mahathirfaced rising opposition to his increasinglypersonalized and
authoritarianrule in 1998-99, he did not face the challenge in an institutionalvacuum. Rather,he confrontedit with the full assistance of a well-developed apparatusof
party-state organizations that has exhibited a long institutional history of nipping
opposition in the bud.13Most important,Mahathirinheriteda British colonial legacy
of expansive emergency-style powers (most notoriously, the draconian Internal
SecurityAct), as well as highly developed coercive organizationsunder tight hierarchical control, especially the federal police.14 If Mahathirchooses to crush rather
than accommodate his personal rivals, he can count on formidable authoritarian
institutionsto carry out his orders.Only a brave or self-destructivefew are willing to
risk a confrontationwith Mahathir'sinfrastructuralpower by challenging his despotic power.
The resilience of Mahathir'sregime during the crisis of 1998-99 representednot
simply a triumphof individualwill, but also an impressive display of well-developed
authoritarianinstitutions in synchronous motion. When Mahathir says "I actually
work as a team,"he may be semantically incoherent,but he is substantivelycorrect.
As opposition to his leadershipincreased, Mahathirdeployed an armada of institutions-the police, media, judiciary,bureaucracy,and party-to destroyhis chief rival
and quell rising demandsfor political reformasi.
The loyalty and compliance of these institutions were not evidently based on
widespread affection for the prime minister. Rather,they appearedto be based primarily on the logic of obedience in a tightly defined institutionalhierarchy,in which
top officials hold the effective capacity to recognize cooperation and defection and
to rewardand punish them accordingly.Although a majorityof governmentofficials
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ComparativePolitics
October2003
evinced dissatisfactionwith Mahathir'sstrong-fisted approach,they did not disobey
his orders, as often happens when political institutions lack strongly established
channels of hierarchicalcontrol.15Faced with dire consequences for noncompliance,
the cogs in the party-statecontinuedobediently to work in their place.
In sum, Mahathirhas used the mechanisms of packing, rigging, and circumventing to accumulate despotic power without significantly undermininghis regime's
infrastructuralpower. Institutionsno longer fetter the executive, but they continueto
choke off political opposition. To say that Mahathir'sregime is eitherpersonalizedor
institutionalizedbut not both is to get only half the story right. In a regime with significant recourse to authoritariancontrols, the relationshipbetween despotic power
and infrastructural power is positive-sum rather than zero-sum. Autocrats can
monopolize despotic power without squandering infrastructural power, as in
Malaysia from 1987 to 1997. Mahathir'sgrowing personalization of power during
the recent political crisis was predicated on the strong backing he received from
Malaysia's highly institutionalizedpolitical organizations.This institutionalframework is valuable for comparativeresearchon authoritarianinstitutionsand democratic transitions.High levels of infrastructuralpower not only foster a regime'spersonalization, but also appearto increase its resilience in the face of pressuresfor democratization. When underlying political organizations remain capable and coherent,
authoritarianregimes can become more personalizedwithout becoming more brittle,
contraryto theoreticalexpectationsthat personalizationmakes authoritarianregimes
more vulnerableto collapse.16
Institutions in an Authoritarian Setting
Unlike democracies, authoritarianregimes can be highly personalized and highly
institutionalizedat the same time. A democracy that fails to curtail despotic decision-makingpower can not be called institutionalizedin any meaningfulway, but an
authoritarianregime that lacks institutions for curtailing the executive might still
exhibit powerful institutions for curtailing dissent. Before the positive-sumrelationship between personalizationand institutionalizationin authoritariansettings can be
recognized or the causal impact of authoritarianinstitutions on democratictransitions determined,the critical distinction between these two very differenttypes of
institutionsmust be appreciated.
Studies of political institutionalization typically encompass both despotic and
infrastructuralpower, yet they fail to note that two distinct dimensions are being
measured. For instance, BarbaraGeddes defines an authoritarianregime as being
institutionalizedundera ruling party,ratherthan personalized,if "the partyhas some
influence over policy, controls most access to political power and governmentjobs,
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Dan Slater
and has functioninglocal-level organizations."'7Autocraticpersonal rule is replaced
by oligarchic party rule when the ruling party manages to impose constraintson the
leader's despotic power and to extend its organizationaltentacles to the grass-roots
level.
Combining two distinct historical processes under a single concept, however,
leaves little conceptual guidance in assessing regimes that have undergoneone without the other. Even if it can be safely assumed that such political procedures and
organizationshave historicallybecome institutionalizedin tandem, it should not necessarily be assumed that they become deinstitutionalized in tandem as well. For
example, in a regime such as the institutionalized single party regime Geddes
describes, an aspiring autocratmight gradually usurp the ruling party's influence in
making authoritativepolicy and personnel decisions. Could it be safely assumed that
the party's"functioninglocal-level organizations"would cease to function effectively as a result? Evidence from Malaysia will show that Mahathir Mohamad has
appropriatedeffective decision-makingpower from a ruling party that continues to
bestride the Malaysian polity like an organizational colossus. Yet there is no adequate conceptual frameworkeven to describe regimes that become highly personalized along one dimension while remaininghighly institutionalizedalong another.
Selection bias appearsto be the main culprit. Most studies of institutionalization
focus on cases where either weak political organizationsare correlatedwith personalized decision making, or strong political organizations coincide with routinized
decision-makingprocedures.Studies of personal rule have derived mostly from subSaharanAfrica, where states have indeed tended to lack infrastructuralpower.I8
TheAfricanAutocratfaces limitationson his rule,butthey are the limitationsof resourcesand
organizational
capability-notof discretionary
power.His poweris limitedby the relative"underdevelopment"of the ruling apparatusavailable to him, by limited finances, personnel, equipment,
technology,andmateriel,as well as by the limitedskillsandabilitiesof his officials.Buthis disis-in principle-unlimited.19
cretionary
powerto directthisapparatus
Why must an autocratwith such unlimited despotic power be saddled with such limited infrastructuralpower? Why must states with highly developed political organizations not be governed autocratically?The failure to distinguish between despotic
and infrastructuralpower obscures how personalization and institutionalization
might go hand in hand in authoritarianregimes.
How should political scientists cope with this conceptual complexity? One solution is to drop capable political organizationsfrom the definition of institutionalization altogether and limit attention to the regularization of decision-making procedures. Geddes ultimately chooses this parsimonious option, discarding her earlier
approachand defining institutionalizationstrictly by how regimes make decisions,
not by how they implementthem.20
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The problem with this approach is that the organized execution of leadership
decisions is simply too importantto ignore, especially in an authoritariansetting.
Among America'skey political institutions,a litany of proceduresis designed to curtail executive despotism: presidential term limits, advice and consent, judicial
review, and federalism.But in authoritarianregimes (or unconsolidateddemocracies,
for that matter),the most durableand consequentialinstitutionsare typically organizations. In Turkish,Indonesian,and Pakistanipolitics, for example, military forces,
even when they are not playing a leading, day-to-daydecision-makingrole, are more
importantthan the regimes' official decision-makingprocedures.
It is thereforenecessary to incorporateboth despotic and infrastructural
powerinto
the institutionaltypology of authoritarianregimes. The most common institutional
typology-military, single party, and personal-can capturehow despotic power is
organized, since militaries, ruling parties, and individual leaders can all ostensibly
make authoritativedecisions.21But it can not capturehow infrastructuralpower is
organized,because personalrule says nothingaboutwhich organizationscarryout the
leadership'sorders.To encapsulatethe key institutionsof any authoritarianregime, it
is necessary not only to inquireabout who decides, but also about who executes.This
approachgeneratesa new, four-parttypology (see Table 1).22This new typologymost
obviously differs from other frameworks in excluding personal rule as a distinct
regime type, while includingpersonalizationas a proceduralattributeof varyingforce
in both party-backedand military-backedregimes. In a modem authoritarianregime,
even a leader who enjoys significant charismaticor traditionallegitimacy must ultimately depend on his regime'sorganizationalapparatusto distributeselective rewards
to loyalists and impose selective punishmentson rivals.
To establish the analytic value of this new typology, however,it is criticalto show
that these two types of institutionsdiverge not only conceptually,but also empirically. If high levels of infrastructuralpower always coincide with strong constraintson
Table 1 InstitutionalTypologyof AuthoritarianRegimes
(
(ho Executes?) ur
hna
Anum~ati
Bossism
Machine
____
9(Who
Milili
j~~.
DecidesIa)M11g Stroogman
Junta
.
I
Malaysia('9 ?-98), Singap re,'Vetnam,China(1976-present)
Machn:
Bojsis: Malaysia(1998-present)China(Mao),Kenya(Mot),Zimbabwe(Mugabe)
Brazil(pre-19&)
Korea
(pre-1987).
Burma,Thailand(r 1988),South
(M= arraf), Nigeria(Abacha)
(Mar )MPakistan
Of
Philippines
SRD s: Indonesia;(Sh
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Dan Slater
despotic power,there is no reason to replace the existing tripartiteinstitutionaltypology with the four-partversion in Table 1. It will only have sacrificed parsimonywith
no compensating increase in analytic power. In contemporary Malaysia powerful
regime organizationshave not prevented the prime minister from monopolizing the
effective power to make authoritativedecisions. To the contrary, the existence of
such highly institutionalizedorganizationshas given MahathirMohamadthe institutional muscle he needs to keep political opposition in check.
Mechanisms of Personalization
How might an authoritarianruler usurp effective decision-making power from an
institutionalizedcollectivity that put him in power?23Conventionaltheory holds that
personalizationtends to occur in the early stages of a regime, before solid institutions take root.24It can grasp Lenin and Mao, who built loyal political organizations
from scratch throughpersonal charisma,but not Stalin and Ceaugescu (or in a less
totalitarianvein Mahathir,Moi, and Mubarak),who turnedinheritedorganizationsto
their own purposes.
Malaysia thus presents a serious theoreticalpuzzle, because it is a clear instance
of postinstitutionalpersonalization. Its party system and state apparatushad been
highly institutionalizedfor decades-both in the sense of oligarchic decision-making
procedures and coherent, capable organizations-before Mahathir became prime
minister in 1981. Michael Leigh neatly sums up the antecedent potency of
Malaysia'sruling institutionsand their subsequentdominationby Mahathir.
Probablythe most enduringconsequenceof the Mahathirerahas been a deliberateanddecisive
weakening of Malaysia'sinstitutions,including the judiciary, the royalty,the independentcivil service, the parliament,the electoral system and now UMNO, the core party of power....The institu-
tionsof governance
aremuchweaker,andrulershiphasbeenpersonalized
in a waythatis without
precedence in Malaysia. Much of the past strength of Malaysia, by contrast with its neighbours,
was in the enduranceof institutionsthat comfortablyaccommodatedchangesof leadersover
time.25
Leigh is not the only Malaysia-basedscholar to conclude that Mahathir'siron fist
has overpoweredMalaysia'spreexisting iron cage of political institutions. Ho Khai
Leong argues that "the present office of the Prime Minister is a matrix of autocracy.
The constitutionalprocesses and institutionsthat act as checks to prevent the Prime
Minister from gaining dictatorialcontrol over the nation are incapable of functioning
effectively."More specifically, "underthe Mahathiradministration,the Cabinetis no
longer used as a forum, but ratheras a rubber-stampinstitutionthat gives legitimacy
to governmentpolicies."26Khoo Boo Teik has similarly noted that there has been a
centralization,"in some cases even a personalisation, of power...at the expense of
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October 2003
the independenceof key institutions."ChandraMuzaffarconcurs that the "most disastrous" aspect of Mahathir'stwenty years of rule has been "the emasculation of
independentinstitutionslike the judiciary,the police, parliament,universitiesand the
media."He adds: "That'sbeen the greattragedy of his rule-the overwhelmingdominance of one man."27
However, these scholars are simply arguing that despotic power has gone from
highly constrainedto highly concentrated.Autocracy has displaced oligarchy.They
are not arguing that the leadership is losing institutional control over active and
potential opposition. It is thereforepartiallymisleading to say, as these observersdo,
that institutionssuch as UMNO, the judiciary,and the media have been weakenedor
emasculated. As democratic constraints on executive power, these institutions are
indeed shadows of their former selves. But as authoritarianmechanisms for rewarding loyalty and punishing opposition to the regime, they remainrobust.
Mahathirhas indeed managed to debase Malaysia's preexisting proceduresfor
executive constraint,but not, as theory would predict, because they were especially
weak to begin with. He has managed to personalize power because his institutionalized command over the party-state apparatushas permitted him to overpower or
intimidate any individuals and institutionsthat stood in his way. One can not fully
understandthe newfound weakness of Malaysia's institutions at fulfilling the core
democratic function of curtailing the executive without first comprehendingtheir
long-standing and continuing potency at fulfilling their core authoritarianfunction
of curtailing political opposition. How can aspiring autocratspersonalize decisionmaking power in the face of preexisting procedural constraints? They have three
mechanisms at their disposal: packing, rigging, and circumventing.
Packing Packing is the appointmentof personal loyalists to top party and government posts while purgingrivals, therebyconvertinginstitutionalconstraintsinto institutional weapons. Authoritarianinstitutionalizationimplies not only high levels of
commandand control within regime organizations,but also the extension and elaboration of these organizations to impose political control over society. Where such
apparatusesof control predate a ruler's rise to power, an aspiring autocrat'sprime
objective is to commandeerthem for his own purposes.This goal is most effectively
accomplishedthroughthe packing of these organizationswith the ruler'sloyalists.
With a wide array of proceduralprerogativesto make personnel appointments,
Mahathirhas graduallymanagedto gain personal dominationover his regime'smost
potent organizations.He began to undertakethis packing strategymost forcefully in
1987. As the result of a split within UMNO, TengkuRazaleigh nearly won control
over Mahathir'spositions as the party'spresident and the nation's prime minister.In
response, "Mahathirpurged his cabinet of Razaleigh's remaining supporters,who
included three senior ministers and four deputy ministers, even though all of them
had won party posts during the UMNO elections."28These purged leaders subse88
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Dan Slater
quently went to court to appeal Mahathir'snarrowvictory in the leadershipvote and
their subsequentexpulsion from UMNO. "The Supreme Court rejectedthe appeal in
August 1988, but not before Mahathirhad impairedthe independenceof the judiciary by securing the removal first of the Lord President, Salleh Abbas, on the grounds
of judicial misconduct, and then of five Supreme Court judges who had risen to
Salleh's defense."29
In short, to help him pack the cabinet and UMNO's supreme council, Mahathir
needed to pack the judiciary. The effects have been significant. "Before 1987, we
had a very good legal system,"notes one political analyst. "Now you see judges driving around in big Mercedes with tinted windows and 'Hakim Negara' (Federal
Mahathirhas thus used the
Judge) in big letters. They all belong to Mahathirnow."30o
to
the
transform
from
one of the more respectMalaysian
strategy
packing
judiciary
ed and independentlegal bodies in Asia into a powerful fist at the end of his executive arm. Ratherthan curtail Mahathir'sdespotic power, the judiciary now primarily
serves to enhancehis regime's infrastructuralpower.
Mahathiralso responded to the crisis by packing the most importantpost in the
cabinet with his most trustworthyloyalist of all: himself. From the UMNO split in
1987 until after the sacking of Anwar Ibrahimin 1998, Mahathirretainedthe portfolio of home minister, thus grantinghimself effective control over the real muscle in
Malaysia'sparty-state,the police. Mahathir'spersonal stranglehold over this highly
effective and repressive police force was a major reason why social pressures for
political reform were snuffed out after Anwar Ibrahim's removal from office in
September 1998. For now, the key point is that packing allows a leader to personalize decision-making authority without necessarily weakening the capacity of the
organizations in question to execute his commands. Indeed, the more well-established the institutionis, the greaterare the chances its cogs will remain fixed regardless of who is guiding the mechanism.
Rigging Rigging is the strategicmodification of institutionalrules and procedures
to forestall competition for leadershippositions. Packing provides an ideal mechanism for denying challengers access to the organizationalbases of regime strength,
but it has no direct effect on the proceduresthrough which the leadershipmight be
challenged. In Malaysia, the only road to power leads directly throughUMNO, the
ruling party. Since the party and state apparatuseshave become tightly intertwined
over more than forty years of single party hegemony, whoever controls UMNO
effectively controls the state. Historically,UMNO has been notable for its democratic intrapartycompetition, even as it acted in highly authoritarianways in the wider
polity. Having nearly been toppled by such democratic intrapartycompetition in
1987, Mahathirused his dominance of the packed UMNO supreme council to systematically rig UMNO's internal election procedures. In short, "Mahathirremade
UMNO itself. He changed the party's constitution to make it difficult to challenge
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incumbents. Mahathir,who stands for re-election every three years, has ever since
run unopposed."31
This rigging of UMNO proceduresgatheredpace in the mid 1990s, as Mahathir
increasingly feared a possible leadership challenge from his popular deputy,Anwar
Ibrahim.While Anwar enjoyed substantialgrass-rootssupportwithin UMNO, he had
difficulty gaining a foothold in UMNO's supreme council and the cabinet. Yet
Mahathir'sdominance of UMNO in the supreme council and cabinet could not protect him from a floor vote at an UMNO general assembly meeting like the one
Razaleigh'ssupporterscalled and nearlywon in 1987.
Hence Mahathir'sneed for proceduralrigging. A detailed overview of the procedural changes has been provided elsewhere, but the basic rigging strategyis worth
outlining briefly.32Mahathirintroducedan array of bonus votes, no contest resolutions, and bans on campaigning for top party posts to ensure both his and Anwar's
continued incumbency as UMNO president and vice-president. IncludingAnwar in
this protective net secured the supportof his faction for many of these resolutions,
without permittingAnwar to resolve his deeper political problem, his lack of representation on the supreme council. When Mahathirchose to sack Anwar on unsubstantiatedcharges of sexual misconduct in 1998, he only needed the approvalof the
supreme council, where his own loyalists had been effectively packed, and not the
UMNO general assembly,where Anwar'ssupportmore closely rivaledMahathir's.
UMNO procedures have clearly been rigged to facilitate Mahathir'spersonal
domination of Malaysia's hegemonic political organization. But has UMNO lost
organizational coherence or infrastructuralpower over society as a result? In the
sense that UMNO lost substantialsupportin the 1999 general election, largely due
to public outrage over Anwar'sdismissal and vilification, it has indeed been weakened. Yet it still utterly dominates the ruling coalition and still enjoys the kind of
mass membership, territorialcomprehensiveness, and grass-roots intelligence network that it has developed over more than four decades in power. As unchallenged
UMNO leader, Mahathiris the main beneficiary of "the party'sformidableelectoral
machinery,"which "reachesdown to the smallest villages. UMNO stations one officer to monitor each 10 households in most ruralareas."33Mahathir'srigging of party
proceduresmight have worn the machinerysome, but it has certainlynot eliminated
UMNO's infrastructuralpower at the grass roots altogether.
Circumventing
Circumventingis the creation of alternativepolicy channels to
divert influence and resources away from rivals in mainline governmentdepartments
and toward loyalists in packed institutions.Any aspiring autocratis likely to enjoy
more success at packing some regime organizationsthan others. When confronted
with organizationsthat are too politically risky or intractableto pack, he can use the
mechanism of circumventionas a fallback option. This approachaims to ensurethat
authoritative channels for policy implementation and patronage distributionflow
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through organizationscontrolled by the autocrat'sloyalists, ratherthan his rivals. In
short, circumventionprivileges packed organizationsover unpackedones.
Mahathirhas deployed such a strategyby systematically diverting decision-making authorityon nearly all majorpolicy issues to the prime minister'sdepartment,the
most packed organization in the Malaysian government by definition and design.
Under Mahathir's watch, the prime minister's department has evolved into the
regime's nerve center for distributingpayments to loyalists and delivering punishments to rivals. Specifically, Mahathirhas circumventedmainline economic departments like the finance ministry-controlled from 1993 to 1998 by Anwar Ibrahimto manage Malaysia'sprivatizationagenda throughthe prime minister's department.
Since privatizationhas been "the major form of patronageduringthe 1990s" for the
UMNO-led regime, Mahathir'sdirect control over this process has been fundamental
in his seizure of personalizeddecision-makingauthority.34
Might this type of deinstitutionalizationof decision-making procedurestranslate
into the deinstitutionalizationof decision-executing organizations?While the packing and rigging of institutions has no clear negative effect on an authoritarian
regime's infrastructuralpower, it is trickier to assess the possible impact of circumvention. Packing implies commandeeringthe power of an existing institutionfor personal purposes; circumventioneither requiresthe creation of entirely new organizations or requiresexisting organizationsto take on entirely new tasks. Circumvention
thus implies the squanderingof at least a portion of a regime's institutionalinheritance. The big question is whether such institutional fraying can be expected to
increase the chances of a regime's collapse and subsequentpolitical transition.
Bossism in Bloom
"Bureaucracyhas been and is a power instrumentof the first order-for the one who
controls the bureaucratic apparatus."35Mahathir Mohamad exerted increasingly
autocraticcontrol over the Malaysianpolitical system by the mid 1990s. Key events
during Malaysia's dual political and economic crises of 1997-99 provide even
stronger evidence that Mahathirmanaged to personalize decision-making authority
and to do so by turningthe UMNO party-state'spowerful authoritarianinstitutionsto
his personal advantage. Mahathir'sregime proved easily capable of surviving the
financial and political crisis, in spite of its growing personalization. The regime
hung together rather than breaking apart. Specifically, it hung together behind
Mahathir'sstrategy of resolving the crisis primarilythrough repression ratherthan
accommodationof dissent. The absolute loyalty of the police and other institutions
of political control to Mahathirmade the regime more effective ratherthan less in
foreclosing opportunitiesfor resistance. It not only made the regime more personalized, but also forestalledany prospect for a transitionto a more democraticorder.
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By 1997 only Mahathir'sdeputy, Anwar Ibrahim, still presented a check on his
political preeminence. Mahathir'sposition suddenly became more tenuous, however,
when the Asian financial crisis spread from Thailandto its SoutheastAsian neighbors. As the Malaysian ringgit and stock market plumbed new depths, Mahathir
feared that he would be unable to rescue his political supportersin the corporatesector, who were suddenly buried under unserviceable mountains of privatedebt. This
personal corporate clientele had been cultivatedthroughoutthe 1990s by an extensive privatization program, managed through the prime minister's departmentby
Mahathirand his long-time associate, Daim Zainuddin.Mahathirwanted to ensure
that he and Daim, and not Anwar, would make the final decisions on which corporate figures received state assistance. But Anwar was still perched atop the finance
ministry and seemed more concerned than Mahathirabout the restorationof foreign
investorconfidence, even if it meant letting some well-connected businessmenfail.
To ensure uninterruptedpersonal control over the distributionof state resources,
Mahathir deployed a circumvention maneuver, creating an ad hoc National
Economic Action Council to counter Anwar's finance ministry.As always, this circumvention entailed the privileging of an ally as well as the weakening of a rival, as
Daim, Malaysia's "virtual finance minister,"was appointed to lead the council.36
Mahathiralso used his direct control over a variety of discretionaryfundsto prepare
strategic bailouts for key allies in the corporate sector. These assets included the
national pensions fund, a savings account for Muslim pilgrims to Mecca, and, most
important, the national oil company, Petronas, which also falls directly under the
Malaysian prime minister's control. With an estimated $25 billion in cash as of
November 1998, Petronas had more reserves on hand than the Malaysian central
bank.37
By circumventing the finance ministry, Mahathirwas sending Anwar a strong
message not to intervene in his bailouts of leading corporatefigures. But in March
1998 Anwar insisted on an independent audit of a Petronas-funded rescue of
Konsortium Perkapalan Berhad (KPB), a heavily indebted shipping concern.
Anwar's intervention was particularlybold because the bailout aimed to use $420
million in Petronas funds to wipe out the private debts of KPB's chief executive,
Mirzan Mahathir,the prime minister's oldest son. When the bailout went through,
one UMNO official lamented:"I thoughtsuch things could only happenin Indonesia
or some African country."38
Once Anwar's objection to the Petronas-Mirzan bailout made his loyalty to
Mahathir suspect, the prime minister stepped up his strategy of circumventing
Anwar's finance ministry by diverting authorityto ad hoc, packed executive agencies. In June 1998 Mahathircreated a special cabinet post for Daim, ministerof special functions underthe aegis of the prime minister'sdepartment.On economic policy Mahathir'spacking and circumventingtactics had redirectedday-to-daydecision92
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making power from his chief rival to the hands of his chief loyalist. He thus maintained a tight grip on the institutionalcircuits throughwhich patronageflowed.
Politically, Mahathir'sefforts to weaken Anwar gathered steam as well. In July
1998, just six weeks before Anwar's eventual sacking, Mahathir engineered the
replacementof the editors-in-chiefof two of Malaysia'sleading newspapers,as well
as the director of operations at one of Malaysia's top television stations. All were
reportedly close to Anwar. This replacement of rivals with loyalists in the mainstreammedia qualifies as an instance of packing a regime organization,because the
press in Malaysia is far from independentof the government.The Malaysian press
can best be thought of as the main propagandaapparatusfor the UMNO party-state
or as a semiprivatizedappendage of the information ministry. All the mainstream
papers are owned by corporateproxies for UMNO and its coalition partners,and the
home minister has carte blanche to ban or curtail independentmedia outlets under
the Printingand PublicationsAct. Said one of Anwar'sassociates in response to the
dismissal of his top supportersin the press: "Their removal is the biggest setback
Anwarhas had since he became deputy PM."39
With Anwar's allies in the press removed, Mahathirhad a free hand to destroy
Anwar througha Blitzkrieg-likecampaign of characterassassination.As home minister and overseerof the police, Mahathirannouncedin September 1998 that Anwar
would be sacked due to homosexual conduct discovered by the police's special
branch investigativeunit. A special meeting of the UMNO supreme council promptly executed the prime minister'scommand.As Anwar himself described the session:
"The president of the party opened the meeting by suggesting that I have to be
expelled from the party before giving me the floor. What do you expect the supreme
council membersto do? If they disagree, they will be expelled too."40
Once Anwar was officially removed,Mahathirpacked and rigged Malaysia'seconomic policymaking institutionsto limit the financial fallout. Realizing thatAnwar's
dismissal would cause a collapse in investor confidence, Mahathirannounced new
capital controls, thus preventing foreign investors from speculating against the
Malaysianringgit or repatriatingfunds from the sale of their Malaysian stocks. With
this breathingspace, Mahathirmoved to force down interest rates to ease the debt
burden on well-connected companies. Since lending rates are officially determined
in Malaysia by an independentcentral bank, Mahathirreplaced the market-friendly
bank governor with the director-generalof the economic planning unit, the main
economic arm of the prime minister'sdepartment.
Mahathirthen not merely packed Anwar's former posts with loyal deputies, but
took over some himself. For months after Anwar's dismissal Mahathiradded to his
posts as prime minister and home minister Anwar's duties as finance minister.
Mahathiralso effectively named himself deputy prime minister by refusing to name
a replacementfor Anwar, thus putting Malaysia in danger of a succession crisis for
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October2003
the first time in its history. "Whathappens if the PM dies or falls sick?" asked one
senior UMNO official. "It's irresponsiblenot to have a successor. It could result in
political instability."41
In response to such criticism, Mahathirbrazenly displayed his autocraticcolors.
After announcingto UMNO's supremecouncil that he would not name a new deputy
as promised,over one month afterAnwar'ssacking, he declared:"It is not within the
jurisdictionof the supremecouncil. It is my right to appointa deputy primeminister,
what are his qualificationsand so on. I don't have to refer to anybody on this matter.
That is my prerogative."42Mahathir's packed cabinet put up no resistance. One
senior minister bluntly confirmed Mahathir'sabsolute discretionto sack Anwarunilaterally and to prevent the party elite from collectively selecting a new vice-president: "As the chief executive, the Prime Ministerhas 100% authorityto hire and fire
and we are there at his pleasure."43
Having seized all the main institutionalreins of the regime, Mahathirmobilized a
phalanx of regime organizations-the media, the police, the judiciary, and the
UMNO-dominated bureaucracy-to prevent Anwar and his supportersfrom challenging his leadership. Despite Anwar's popularity, knowledgeable observers of
Malaysianpolitics knew he had little chance against Malaysia'sformidablepolitical
institutions."Anwarhas no political space outside,"said ShamsulA. B. "That'swhy
he has not raised his voice against UMNO. He knows the only way he can come
Jomo K. S. agreed: "Anwaris popularon the
back to politics is throughthe party."44
ground, but organizationally he is weak."45And Singapore's senior minister Lee
KuanYew-a man quite familiarwith the paramountimportanceof powerfulauthoritarian institutions-expressed confidence that Mahathirwould prevail. "I am prepared to wager five to one. I am not saying Anwar Ibrahimhas not got a following.
What I am saying is that there are institutionalchecks and balances and systems that
will not allow civil orderto be upset."46
These systems of control included the progovernmentmedia, which began a onesided campaign of characterassassinationagainst Anwar,presentingthe accusations
against the fallen heir apparentas fact. Given the ownership structureof the media
and the home minister'sprerogativeto rescind publicationlicenses at will, Mahathir
could be confident that the press would not stray too far from the official line.
Multiple independent publications have indeed been banned since 1998, and the
main opposition party has seen its permission to print its own newspaperreduced
from two issues per week to two issues per month.
The Anwar affair also made Mahathir'spersonal dominationof the nation'spolice
force perfectly plain. As home minister, Mahathirclaimed that police investigators
had been telling him about Anwar's sexual misconduct for years, but since he had
not initially believed the allegations, charges had never been pressed. In this clumsy
attempt to appear magnanimous,Mahathirinadvertentlyadmitted that his personal
protectionwas sufficient to place any of his loyalists above the law. When the direc94
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tor of the police's special branchwas called to testify at Anwar's trial on corruption
charges stemming from the sexual allegations, he admittedthat the investigationinto
Anwar'sprivate life, OperationSolid Grip, had been terminatedin August 1997. At
that time, Mahathirhad been quoted in the local press as saying that the rumors of
Anwar'ssexual misconduct were "slanderous,politically motivated,"and "too absurd
to believe." The special branch officer made his rationale for initially ceasing the
criminal investigation perfectly clear: "We have to respect the decision of the PM
and that was the reason why I did not propose to scrutinisethe case."47
Yet the Malaysianpolice also provide the clearest evidence that personal domination over the decision-makingproceduresin an authoritarianregime does not necessarily imply a lack of capacity in a regime's organizationsfor political control. To the
contrary,the Malaysianpolice's institutionalizedloyalty to the prime ministerhelped
ensure its coherence and effectiveness in suppressing both the elite defection and
populardissent that inevitably arose when the most popularpolitician in the country
was summarily dismissed and disgraced. Violent crackdowns on peaceful demonstrations quickly become the norm, and detention of Mahathir'sopponents (including Anwar sympathizerswithin UMNO) under the Internal Security Act became so
routine that the KamuntingPrison for detainees became colloquially known as the
"MahathirMarriott."48The infamous image of Anwar's black eye, courtesy of a
severe police beating in solitary confinement while being held under the Internal
Security Act, serves as ample testimony to the tactics Malaysian police use against
perceived enemies of Mahathir'sregime. After a reportby Malaysia'sstate-appointed
human rights commission criticized the police for their violent suppression of the
reformasimovement,Mahathirappointeda new humanrights commissioner,the former attorney-generalwho had helped him impeach six justices and pack the judiciary in 1988.49
While the police followed Mahathir's orders and maintained stability on the
streets, Malaysia's packed judiciary carried out Mahathir'spolitical death sentence
againstAnwar in the courts. Two trials on corruptionand sexual misconduct charges
duly delivered a combined sentence of fifteen years in prison for Anwar, in spite of
disturbingirregularitiesin the trials' proceedings. The only people to admit having
illicit sexual relations with Anwar did so while being held in solitary confinement
under the InternalSecurityAct, and each later retractedhis confessions and detailed
the police's physical and psychological abuse. When Anwar's lawyers noticed that
the condominiumwhere Anwar was alleged to have performed these trysts had not
even been built when the trysts allegedly took place, the trialjudge allowed the prosecution to alter the dates on the indictment.50Mahathirhas since rewardedthe attorney-general who prosecutedthe Anwar case with a seat on the supremecourt.
Malaysia'spotent party-stateorganizationswere then deployed to ensure that the
opposition would have no chance of removing Mahathir from office through
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Malaysia's "competitiveauthoritarian"institutions. By holding elections before the
end of 1999, the regime claimed the right to leave all 680,000 voters registeredin
that calendaryear off the electoral rolls, recognizing that the lion's shareof new voters would side with the opposition if given the chance. UMNO wound up losing
twenty seats in the election, in spite of a typically one-sided media campaign and
unprecedentedreports of electoral fraud,including the widespread use of "phantom
voters."51When a judge ruled that such electoral abuses in one district were so
severe as to demand a revote, UMNO officials preparedto make futurecourt challenges to election results unconstitutional.52The judgment of the electoral commission-packed, unsurprisingly,with prime ministerialappointees-is heretoforeto be
taken as the final word.
In sum, Mahathirhas packed, rigged, and circumventedinstitutionsto purge and
incarceratehis personal rival, suppress popular demands for political reform, steer
the national economic producttowardhis most loyal supporters,and securethe electoral survival of his authoritarianregime. Authoritarianrule in Malaysiais more personalized, but no less resilient. Nevertheless, the days of Mahathir'sregime, like all
personalizedregimes, are clearly numbered.Eventually,the septuagenarianwill have
to exit the stage, either voluntarily or otherwise.53What arises in his place will
depend to a great degree on how he leaves the scene.54 However, one theoretical
point should be abundantlyclear: authoritarianregimes with coherent and capable
party-stateorganizationsare structurallyvulnerableto processes of personalization,
contrary to the common assumption that personalization feeds off of institutional
weakness. The structuralopportunityfor future UMNO leaders to manipulateinstitutional means for personal ends, as Mahathirhas done, should not be underestimated. As long as control over UMNO continues to ensure control over Malaysia'shighly developed state apparatus,UMNO, in Weber'sterms, is a power instrumentof the
first orderfor the one who controls UMNO.
Summary and Implications
Malaysia demonstratesseveral theoretical arguments.First, in Malaysia after 1998
authoritativedecisions derive from the will of an autocraticindividual,not the deliberations of an oligarchic collective. Malaysia challenges the assumptionthat personalization signifies weak institutionalization.In authoritarianregimes, personalization
can arise amid strong institutionsas well as weak ones. Most important,Malaysiais
noteworthyfor having had one of the most institutionalizedparty-statesin the developing world for decades before Mahathir began monopolizing decision-making
authorityin the mid 1980s.
Evidence from Malaysia also supportsa second theoreticalpoint: highly institutionalized authoritarianorganizationsfacilitate the personalizationof power.Leaders
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like Mahathir,who was fortunateenough to inherit highly effective and disciplined
party-stateorganizationsfrom his predecessors,enjoy personalpower of an altogether differentmagnitudethan leaders like Congo's LaurentKabila, who inherited only
the institutionalruins bequeathedby Mobutu Sese Seko. In terms of decision-making procedures,both Mahathirand Kabila have presided over personalized regimes.
But in terms of available, capable organizations to execute their commands, their
regimes could hardly have been more different.When Mahathirneeded the support
of Malaysia'sauthoritarianinstitutions in late 1998, they dutifully turned their considerable institutionalfirepower against Anwar Ibrahimand his supporters.By contrast,Kabila'spersonal guardturnedtheir firepoweragainst Kabila himself.
Personalization amid strong organizations thus appears to have very different
implications for authoritarian durability than personalization amid weak ones.
Evidence from Malaysia strongly suggests that authoritarianregimes can become
more personalized without becoming less resilient. To state this hypothesis even
more boldly, variation in authoritarianregimes' infrastructuralpower is the key to
explaining variationin their durability.Party-backedauthoritarianregimes appearto
be exceptionally resilient because parties provide ideal organizationalmechanisms
for the coordinatedexecution of decisions, not necessarily their collective formulation. They also appearto be systematicallymore likely than military-backedregimes
to curtail and control dissent through the development of national organizations of
political control.55
Thus, a different causal mechanism links authoritarianinstitutions to democratization than the one Geddes suggests. Her game-theoreticmodel imputes variations
in regime durability from the bargaining incentives confronting different types of
regimes in times of crisis. She ascribes the relative durability of party-backed
regimes largely to the incentives party elites face under crisis conditions to unite, as
tactical decision makers,behind a strategyof coopting potential opponents.
Because the dominant strategy of the ruling coalition in single-partyregimes is to coopt potential
opposition, single-partyregimes tend to respondto crisis by grantingmodest increases in meaningful political participation, increasing opposition representation in the legislature, and granting
some oppositiondemandsfor institutional
changes....Thisstrategyonly workssometimes,but it
worksoftenenoughto extendtheaveragelifetimeof single-party
regimes.56
This general explanation of single party durabilityis echoed by many Malaysians,
who often explain the UMNO regime's durabilityas a result of its commitment to
regular,semidemocraticelections that serve as a pressurevalve for political opposition. Ascribing the regime's resilience to its relative responsiveness would have been
a hard argument to dispute before 1998, but this explanation sits less well with
recent evidence. Malaysia'sparty-statedid not respond to the political crisis of 1998
by softening its stance towardits opponents, as Geddes would predict, but ratherby
becoming increasingly authoritarian.Such state violence and repression might have
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sounded the death knell for a less organizationallycapable regime, but in Malaysia,
where authoritarian organizations have a decades-long institutional memory,
increased state repressionserved as a winning strategy.57
Nor does Malaysia appearto be an outlier in this regard.In the past severalyears
alone, party-backedregimes that have loosened controls on the oppositionwhile permitting freer and fairer elections have been removed from office in Mexico, Taiwan,
and Senegal. Meanwhile, party-backedregimes that have combined semicompetitive
elections with continuing illiberal repression of the opposition have perseveredin
such countries as Malaysia, Singapore, Cambodia, Zimbabwe, Kenya, Uzbekistan,
Tunisia, and Egypt. Single party regimes might be particularlydurablebecause of
the way they organize repression, not representation.This hypothesis gains further
prima facie plausibility from those single party regimes that have completely
eschewed the fagade of electoralismin the past decade. Cuba, China, Laos, Vietnam,
and North Korea have proven surprisinglyresilient. In short, the world'sremaining
single party regimes seem to sharea strongercommon commitmentto coercingtheir
opponentsthan to coopting them.58Authoritarianregimes seem most likely to persevere when their institutionsexhibit sufficient infrastructuralpower to curtailopposition by punishing opponents and rewardingloyalists in pinpoint fashion. It seems
less important whether authoritativedecisions represent the product of collective
deliberationor individualwill.
NOTES
I wouldlike to thankJasonBrownlee,MichaelCoppedge,RickDoner,EdmundTerenceGomez,Walter
Hatch,Allen Hicken,JomoK. S., RichardJoseph,BruceKnauft,Lee HockGuan,AndrewMacIntyre,
DanReiter,BryanRitchie,RichardSnyder,RandyStrahan,
KelleeTsai,andTuongVufortheircomments
hasbeensupported
andencouragement.
Fieldwork
Vernacular
Modernities
by the FordFoundation's
proEducation.
gramandtheInstituteforInternational
1. H. H. Gerthand C. WrightMills, FromMax Weber:Essays in Sociology(NewYork:Oxford
UniversityPress,1946),p. 228.
2. ThomasFuller,"Malaysia
Unrest:'WeArePrepared
to HandleIt,"'International
HeraldTribune,
Sept.23, 1998.
3. Malaysiahasexhibitedanatypically"strong,centralized,
directivegovernment"
sincebeforeindeeversince.See
pendencein 1957and"hasexperienced
politicscharacterized
continuity"
by extraordinary
RichardStubbs,"TheMalayanEmergency
andthe Development
of the Malaysian
State,"in PaulB. Rich
and RichardStubbs,eds., TheCounter-Insurgent
State: GuerrillaWarfare
and StateBuildingin the
Twentieth
andSociety
Century(NewYork:St. Martin'sPress,1997),p. 67; HaroldCrouch,Government
in Malaysia(Ithaca:CornellUniversityPress,1996),p. 32.
4. I defineauthoritarian
regimesbroadly.Theyincludeany regimein which"incumbents
routinely
abusestateresources,denythe oppositionadequatemediacoverage,harassoppositioncandidatesand
theirsupporters,
andin somecasesmanipulate
electoralresults."See StevenLevitskyandLucanA. Way,
"TheRise of Competitive
Journalof Democracy,13 (April2002), 52, andotherartiAuthoritarianism,"
cles in thisissueon "electionswithoutdemocracy."
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5. Mann defines despotic power in terms of the state's autonomy from civil society. I extend Mann's
concept beyond power relationshipsbetween state and society to those within the state itself. See Michael
Mann, States, War,and Capitalism:Studies in Political Sociology (Oxford:Basil Blackwell, 1988), p. 5.
6. Jennifer Gandhi and Adam Przeworski, "Dictatorial Institutions and the Survival of Dictators,"
paper presented at the annual meeting of the American Political Science Association, San Francisco,
August 2001; Lisa Wedeen,Ambiguitiesof Domination: Politics, Rhetoric, and Symbols in Contemporary
Syria (Chicago: University of Chicago Press, 1999); Gregory Kasza, The Conscription Society:
AdministeredMass Organizations(New Haven:Yale University Press, 1995).
7. This term is also Mann's. It refers to "the capacity of the state to actually penetrate civil society,
and to implementlogistically political decisions throughoutthe realm."Mann, p. 5. Yet a regime can overcome societal resistance only if it has first generated compliance within the state apparatus.I therefore
include the organizationalcoherence of state institutionsin my definition of infrastructuralpower.
8. As Michael Coppedge has suggested, "this phenomenon is not unknown, but it is untheorized."
Discussant's comment at the American Political Science Association annual conference, San Francisco,
August 30, 2001.
9. A single case can strongly impugn a hypothesis by showing that it fails to hold where it should be
most expected to hold. See Harry Eckstein, "Case Study and Theory in Political Science," in Fred
Greenstein and Nelson Polsby, eds., Handbook of Political Science, vol. 7 (Reading: Addison-Wesley,
1975).
10. While UMNO rules througha multiethnic coalition, the Barisan Nasional (BN) or National Front,
its position within the coalition is so hegemonic that Malaysia is essentially a single party regime. To simplify matterssomewhatfor nonspecialists, I refer to UMNO ratherthan to the BN throughout.
11. William Case, "Malaysia's Resilient Pseudodemocracy," Journal of Democracy, 12 (January
2001), 43-57; Levitsky and Way,p. 51.
12. See ZakariaHaji Ahmad, "Malaysia:Quasi-Democracyin a Divided Society,"in Larry Diamond,
Juan J. Linz, and Seymour MartinLipset, eds., Politics in Developing Countries, vol. 3 (Boulder: Lynne
Rienner, 1989); William Case, "Semi-Democracy in Malaysia: Withstandingthe Pressures for Regime
Change," Pacific Affairs, 66 (Summer 1993), 183-205; Crouch, ch. 13; Gordon P. Means, "Soft
Authoritarianismin Malaysia and Singapore,"Journal ofDemocracy, 7 (October 1996), 103-17.
13. Crouch,ch. 5.
14. Stubbstraces the Malaysianstate'simpressive coercive capacity to the British-led emergency operation against leftists from 1948 to 1960. "By the end of the Emergencythe Malayangovernmenthad built
up a substantialand relatively efficient security apparatus.The police had become a sizeable organisation
and the Special Branch had gained a deserved reputationas an intelligence-gatheringorganisation."See
Stubbs, p. 67. This security apparatuscontinued to play an active role in curbing dissent during the interregnum between British rule and Mahathir'sascendancy to the prime ministry."Between 1960 and 1981,
3,102 people were detainedat one time or anotherunderthe ISA." See Crouch,p. 80.
15. Meredith Weiss, "WhatWill Become of Reformasi? Ethnicity and Changing Political Norms in
Malaysia,"ContemporarySoutheastAsia, 21 (December 1999), 432, suggests that perhaps 80 percent of
ethnic Malays in the civil service did not supportMahathir'shandling of the political crisis.
16. BarbaraGeddes, "WhatDo We Know About DemocratizationafterTwentyYears?,"Annual Review
of Political Science, 2 (1999), 115-44; BarbaraGeddes, "AuthoritarianBreakdown:Empirical Test of a
Game Theoretic Argument,"paper presented at the annual meeting of the American Political Science
Association, Atlanta, September1999.
17. Geddes, "AuthoritarianBreakdown,"p. 16. For a definition of institutionalizationin unconsolidated democracies that mirrorsthis dual emphasis on proceduresand organizations,see Scott Mainwaring,
"PartySystems in the ThirdWave,"Journal ofDemocracy, 9 (July 1998), 70.
18. The same can be said for non-African cases of sultanism and neopatrimonialism, such as the
99
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All use subject to JSTOR Terms and Conditions
ComparativePolitics
October2003
Philippines under Marcos, which have attractedmore theoretical attentionthan highly institutionalized
authoritarianregimes such as Malaysia's. See H. E. Chehabi and Juan J. Linz, eds., SultanisticRegimes
(Baltimore: The Johns Hopkins University Press, 1998); Richard Snyder, "ExplainingTransitionsfrom
NeopatrimonialDictatorships,"ComparativePolitics, 24 (July 1992), 379-99.
19. Robert H. Jackson and Carl G. Rosberg, Personal Rule in BlackAfrica: Prince, Autocrat,Prophet,
Tyrant(Berkeley: University of CaliforniaPress, 1982), p. 78.
20. Geddes, "WhatDo We Know?,"pp. 121-22.
21. Geddes, "AuthoritarianBreakdown";Geddes, "WhatDo We Know?";Samuel P Huntington,The
Third Wave:Democratization in the Late TwentiethCentury (Norman: University of Oklahoma Press,
1991); Paul Brooker,Non-DemocraticRegimes: Theory,Governmentand Politics (New York:St. Martin's
Press, 2000).
22. Geddes, "AuthoritarianBreakdown,"operationalizesthe party-personal,party-military,and military-personal divides, which correspond to my machine-bossism, party-military,and junta-strongman
divides. My typology mainly differs in arrangingher variablesalong two dimensions ratherthan one. My
typology is more focused but less ambitious than Juan Linz and Alfred Stepan, Problems of Democratic
Transitionand Consolidation:SouthernEurope, SouthAmerica, and Post-CommunistEurope(Baltimore:
The Johns Hopkins University Press, 1996), which encompasses issues of regime ideology and the extent
of regime domination,not just that domination'sinstitutionalform.
23. Chehabiand Linz, eds., pp. 34-37, recognize the tendency for authoritarianinstitutionsto "decay"
as long-serving leaders turn "sultanistic,"but they do not discuss how institutions might be actively
destroyedratherthan passively "decay,"as dictatorsmanipulatecertain institutionsto destroyothers.
24. Samuel P Huntington,"Social and InstitutionalDynamics of One-Party Systems," in Samuel P.
Huntington and Clement H. Moore, eds., AuthoritarianPolitics in Modern Society: The Dynamics of
Established One-Party Systems (New York: Basic Books, 1970), p. 7; Geddes, "Authoritarian
Breakdown,"p. 6; and Mainwaring,p. 69.
25. Michael Leigh, "Malaysia: 1961 and 2001," paper presented at the annual conference of the
Association for Asian Studies, Chicago, March2001, p. 7.
26. Ho Khai Leong, "Aggrandizementof Prime Minister'sPower:The Transformationof the Office of
the Prime Ministerin Malaysia,"InternationalesAsienforum,23 (1992), 243, 236.
27. Both quoted in Simon Martin, "MahathirStill Firmly in Control on 20th Anniversary,"AgenceFrance Press, July 15, 2001.
28. EdmundTerenceGomez, Political Business: CorporateInvolvementof Malaysian Political Parties
(Kuala Lumpur:Vinlin Press, 1994), p. 62.
29. Ibid., p. 63.
30. Confidential interview,KualaLumpur,1998.
31. Jim Ericksonand Assif Shameen,"MountingPressure,"Asiaweek, Mar.27, 1998.
32. William Case, "The 1996 UMNO Party Election: 'Two for the Show,"' Pacific Affairs, 70 (Fall
1997), 393-411; Hari Singh, "Tradition, UMNO and Political Succession in Malaysia," Third World
Quarterly,19 (April 1997), 241-54.
Far Eastern Economic Review,Nov. 25, 1999.
33. Simon Elegantand S. Jayasankaran,"Juggernaut,"
34. Case, "The 1996 UMNO PartyElection,"p. 399.
35. Max Weber,in Gerthand Mills, p. 228.
36. Ericksonand Shameen.
37. Choong Tet Sieu and ArjunaRanawana,"Filling Up at Petronas,"Asiaweek,Nov. 13, 1998.
38. "The Bailout Business,"Asiaweek, Mar.27, 1998.
39. Assif Shameenand ZoherAbdoolcarim,"Fadingfrom the Picture?,"Asiaweek,Aug. 21, 1998.
40. Eddie Toh, "Anwar Not Ruling Out Switching to Opposition Party PAS," Business Times
(Singapore), Sept. 5, 1998.
100
This content downloaded from 212.175.32.134 on Wed, 31 Jul 2013 09:47:12 AM
All use subject to JSTOR Terms and Conditions
Dan Slater
41. S. Jayasankaranand MurrayHiebert, "The Ringmaster,"Far Eastern Economic Review, Oct. 15,
1998.
42. "LeftVacant,"TheStar, Oct. 7, 1998.
43. Charles Chan, "A Case of Swollen Ego, Says Rafidah", The Star, Sept. 16, 1998. This unconditional supportcame from a ministerwho has repeatedlylost grass-rootselections for the top women's post
in UMNO, only to be resurrectedby Mahathir'sdiscretionaryoffers of seats in the cabinet and supreme
council.
44. Choong Tet Sieu andArjunaRanawana,"A Case of Orderand Disorder,"Asiaweek, Oct. 16, 1998.
45. Ibid.
46. "Crackdown,"Asiaweek, Oct. 2, 1998.
47. Eddie Toh, "ProbeStoppedafter PM's Statement,"Business Times(Singapore),Nov. 10, 1998.
48. Anthony Spaeth, "He'sthe Boss," TimeInternational, Sept. 14, 1998.
49. K. Kabilan,"Police Responsible for Rights Abuses: Suhakam,"Malaysiakini,Aug. 20, 2001.
50. For a complete transcriptof the trial, see TheAnwar IbrahimJudgment(Kuala Lumpur:Malayan
Law Journal, 1999).
51. See MeredithWeiss, "The 1999 Malaysian General Elections: Issues, Insults, and Irregularities,"
paperpresentedat the Annual Meeting of the Association for Asian Studies, San Diego, March2000.
52. K. Kabilan and Ng Boon Hooi, "Electoral Roll Amendment a Danger to Citizens Rights,"
Malaysiakini,July 20, 2001.
53. As one Malaysiancolumnist suggested to me: "The only way this man is leaving office is horizontally."Confidentialinterview,KualaLumpur,July 2001.
54. It is too soon to tell whether Mahathirwill make good on his recent promise (delivered in June
2002) to step down in October2003. More certain is that the decision will be Mahathir'sto make.
55. Malaysia has not taken the totalitarianroute of mobilizing functional groups into "administered
mass organizations."See Kasza, esp. ch. 1. But given the national power and presence of UMNO, the federal police, and state organizationsin general, such extreme measures have hardly proven necessary to
keep opposition in check.
56. Geddes, "AuthoritarianBreakdown,"pp. 16-17.
57. As the inspector-generalof police put it when the reformasi protests startedto swell: "From our
experience in the '50s and '60s, we know what we are dealing with...." "Police OutlawAll 'Reformation
Meetings,"' TheStar, Sept. 23, 1998.
58. Focusing on authoritarianinstitutions as instrumentsof cooptation is important,but incomplete.
Gandhi and Przeworski,p. 3. Authoritarianregimes need strong institutions to serve as instruments of
coercion as well.
101
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Democratisation in Indonesia: From
Transition to Consolidation
Louay Abdulbaki
Published online: 23 Jul 2008.
To cite this article: Louay Abdulbaki (2008) Democratisation in Indonesia: From Transition to
Consolidation , Asian Journal of Political Science, 16:2, 151-172, DOI: 10.1080/02185370802204099
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Asian Journal of Political Science
Vol. 16, No. 2, August 2008, pp. 151172
Democratisation in Indonesia: From
Transition to Consolidation
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Louay Abdulbaki
Despite many pessimistic expectations, the democratisation process in Indonesia has been
progressing steadily over the past decade. The Indonesian political elite has crafted and
stabilised a political transition mainly characterised by frequent, free and fair elections,
peaceful rotations of power, effective elected officials and separation of powers, inclusive
suffrage, freedom of expression, independence of the media and associational autonomy.
In other words, within one decade, Indonesia has developed the main attributes of a
democratic country, according to most theories of procedural democracy. However, the
extent to which Indonesian democracy has been consolidated and institutionalised is
another issue, which requires close examination and assessment. Does the Indonesian
democracy fulfil or approximate the criteria stipulated by theorists of democratic
consolidation? This article investigates the extent to which Indonesia has managed to
advance its democratic transition and evaluates the prospects and challenges of
democratic consolidation. In general, the article asserts that despite the persistence of a
number of shortcomings, the steady progress of the Indonesian democratisation process
and the consistent commitment of the principal political actors to the democratic rules of
the game will likely lead to more institutionalised, policy-driven party politics and a
gradual democratic consolidation in the foreseeable future.
Keywords: Indonesia; Democratisation; Democratic Consolidation; Political Reform
Introduction
The resignation of President Suharto from office on 21 May 1998 marked the end of
four decades of authoritarian rule and the instigation of a transition to a democratic,
multi-party political system in Indonesia. This democratic transition involved a series
of liberalising constitutional amendments and legislative reforms, which fundamentally altered the political process and structure of state institutions. In the process,
Louay Abdulbaki, PhD, is affiliated with the Asia Institute, University of Melbourne. Correspondence to: Louay
Abdulbaki, Asia Institute, University of Melbourne, Melbourne, Victoria 3010, Australia. Email: l_a_baki@
hotmail.com
ISSN 0218-5377 (print)/ISSN 1750-7812 (online) # 2008 Asian Journal of Political Science
DOI: 10.1080/02185370802204099
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152 L. Abdulbaki
Indonesia has successfully conducted two peaceful, free and fair general legislative
elections in 1999 and 2004 and three peaceful rotations of presidential power: from B.
J. Habibie (19981999) to Abdurrahman Wahid (19992001), Megawati Sukarnoputri (20012004) and Susilo Bambang Yudhoyono (2004present). The most recent
president was directly elected by the people for the first time in Indonesia’s history
after constitutional amendments abolished the role of the People’s Consultative
Assembly (Majelis Permusyawaratan Rakyat [MPR]) in choosing Indonesia’s
president.
Although the Indonesian democratisation process has been progressing steadily,
the quality of Indonesian democracy and the extent of its consolidation are still under
serious consideration and heated discussion. While ‘only democracies can become
consolidated democracies’ (Linz and Stepan, 1997: 15), has Indonesia completed its
democratic transition, so that the analysis can be turned to focus on aspects of
democratic consolidation? This article seeks to tackle this question and to provide an
assessment of the consolidation of democracy in Indonesia. However, before
proceeding with a discussion of Indonesia’s democratic transition and consolidation,
the article first discusses some important theoretical issues about the concept of
democracy and sets out a theoretical framework for the rest of the investigation.
Democracy and Its Preconditions
The predominance of democracy, in its various guises, as the most acceptable form of
government, particularly after the demise of the socialist alternative, has been
perceived by some scholars as the end of the history of political ideas (Fukuyama,
1992). However, despite this somewhat uncontested acceptance, democracy remains
one of the most contested or ‘appraisive’ concepts in modern social sciences (Esposito
and Voll, 1996: 184). Dahl, for instance, contends that ‘polyarchy’1 hardly
transcended to a ‘higher’ stage of democracy anywhere (1971: 8), insisting elsewhere
that since democracy ‘has meant different things to different people at different times
and places’, it is questionable that we can ‘possibly agree on what it means today’
(1998: 34).
The most crucial point in the debate about democracy revolves around the issue of
whether democracy is primarily a substantive way of life or a set of procedural rules.
Two broad variants of conceptualisation dominate most approaches to democracy in
this regard: the ‘maximal’ conceptions that stipulate substantive or comprehensive
views encompassing social and economic aspects as defining criteria, and the
‘minimal’ or procedural definitions that are mostly concerned with the process of
institutional arrangements.
The maximalists reject the tendency, especially by some students of comparative
politics, to associate democracy with elections, arguing that elections, though
necessary, are inadequate criteria for democracy. They insist that, in addition to
their vulnerability to manipulation, elections ‘occur intermittently and only allow
citizens to choose between the highly aggregated alternatives offered by political
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Asian Journal of Political Science
153
parties’ (Schmitter and Karl, 1991: 78; Schedler, 2002). Therefore, many of the
scholars who take this line of argument prefer maximal or expansive definitions of
democracy that emphasise broad substantive objectives and equate social and
economic development with democratic institutions. Democracy, according to this
conception, is ‘not simply about form or means; it is also about ends, which have to
do with its inherent capacity to enhance development’ (Osaghae, 1995: 189). Whereas
the maximalists reject procedural democracy on the ground that it fails to consider
problems of social and economic inequalities, minimalists question the usefulness of
the maximal definitions of democracy for empirical research. In fact, by combining
substantive all-encompassing concepts, maximalists conceptualise a democratic ideal,
the expectations of which transcend actual democratic experiences, depicting
democracy as a panacea for all social ills. Huntington draws attention to the fact
that ‘[s]erious problems of ambiguity and imprecision arise when democracy is
defined in terms of either source of authority or purposes’ (1991: 6). He emphasises
that democracies ‘have a common institutional core that establishes their identity’,
concluding that ‘[f]uzzy norms do not yield useful analysis. Elections, open, free, and
fair, are the essence of democracy’ (Huntington, 1991: 9).
Most scholars and analysts of democratic transitions find procedural definitions of
democracy more useful for empirical research because they allow the application of
the concept in various new settings on the one hand, and facilitate the establishment
of an identifiable line which marks the end of the transition to democracy on the
other. According to the proponents of procedural democracy, who mostly follow the
tradition of Schumpeter (1947) and Dahl (1998), democracy is basically a means that
enables all citizens to participate in politics and effectively influence the outcome of
the decision-making process. Schumpeter defines democracy as a method or an
‘institutional arrangement for arriving at political decisions in which individuals
acquire the power to decide by means of a competitive struggle for the people’s vote’
(1947: 269). Dahl presents a concrete institutional structure, according to which the
‘minimal requirements’ for a large-scale democracy must include six political
institutions:
(1) Elected officials [who must enjoy constitutional control over the decisionmaking process]; (2) free, fair and frequent elections; (3) freedom of expression . . .
including criticism of officials, the government, the regime, the socioeconomic
order, and the prevailing ideology; (4) access to alternative sources of information
[e.g., independent media]; (5) associational autonomy and (6) inclusive citizenship.
(1998: 8586, italics original)
In addition to adopting the above procedural criteria in evaluating the
democratisation process in Indonesia, this article emphasises that in order for
democracy to be considered consolidated or stable in a newly democratised country,
it must meet several requirements. Most importantly, authoritarian legacies and
undemocratic alternatives must be totally eliminated and the principal political actors
must demonstrate an unequivocal commitment to the democratic process or ‘the
154 L. Abdulbaki
uncertain interplay of the institutions’ (Przeworski, 1991: 26). In addition, the
occurrence of more than one democratic rotation of power, the institutionalisation of
democratic practices and the development of a majority of public support for
upholding the democratic system are also necessary for democratic stability and for
the prevention of democratic breakdown (Linz and Stepan, 1997; O’Donnell, 1992).
These elements are further elaborated and discussed later in this article.
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Indonesia’s Democratic Transition: The Absence of Preconditions
The sudden and unanticipated fall of Suharto in May 1998 was a decisive moment in
Indonesia’s history. Multiple factors had contributed to this event. The devastating
Asian Economic Crisis, which hit Indonesia hard, was considered by many observers
as the primary factor behind the fall of Suharto’s regime (Schwarz, P., 1999). There is
no doubt that the crisis, to say the least, was one of the important contributing
factors that provided the impetus for many Indonesians to challenge the status quo
and demand radical reforms. Failing to recover the falling rupiah and get the
economy back on track, Suharto’s government submitted to the International
Monetary Fund’s conditions, which included reductions in subsidies and curbs on
favouritism, especially with regard to companies controlled by Suharto’s cronies. The
failure of the New Order government to regain investors’ confidence in Indonesia’s
economic reforms, especially after Suharto’s re-election by the MPR on 10 March
1998 triggered the reformasi (reform) movement, which started with a series of large,
anti-government student-led, demonstrations that spread from Jogjakarta and Jakarta
to many other cities, ultimately culminating in the fall of Suharto’s regime (Mietzner,
1999a, b). After the fall of Suharto, however, the role of the students was rendered
marginal, and the reformasi movement became largely a top-down process of an elitecrafted political transition, as elaborated in the following section.
Indonesia’s unexpectedly successful democratisation has indeed dispelled many
myths and flawed assumptions that have previously influenced the literature on
democratisation in developing and Muslim-majority countries. For example, one of
these assumptions is that development and modernisation, a justification used by
most authoritarian regimes to prevent rather than promote democratisation, is a
‘precondition’ of or conducive to democracy (Diamond, 1992; Lipset, 1994). Other
theories that also largely lost their explanatory power stipulate that public democratic
culture is a precondition which must precede the democratisation process in order
for the democratic transition to proceed steadily and for democracy to take hold
(Almond and Verba, 1963; Almond 1980).
Modernisation and development theorists assert that increased degrees of
economic prosperity, industrialisation, urbanisation and education promise enhanced levels of political participation and democratic development. They assert that
economic development is a precondition for democratic transition and consolidation
because it leads to social transformations, such as the growth of the middle class and
literacy levels necessary for the promotion of political representation, participation
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Asian Journal of Political Science
155
and government accountability (Lipset, 1994). In Political Man, Lipset argues that the
level of modernisation or development in a certain country determines its potential
to become a democracy, concluding that ‘the more well-to-do a nation, the greater
the chances that it will sustain democracy’ (1960: 31) Other more recent studies that
have tested Lipset’s hypothesis claim to have found substantial confirming results.
Thus, ‘the more well-to-do the people of a country, on average’, Diamond affirms,
‘the more likely they will favour, achieve, and maintain a democratic system for their
country’ (1992: 468). Yet empirical evidence, as many studies concluded, has proved
that the process of modernisation and rapid economic and social change can also
‘breed socioeconomic conflict and political instability’ (Abootalebi, 2000: 4;
Huntington and Nelson, 1976).
On the other hand, the extent to which cultural values and shared attitudes
influence political change and behaviour has been the major concern of many
political and social scientists. Many scholars emphasise that democratic political
culture for example, negotiating, bargaining, accommodating and willingness for
compromise is a precondition for successful democratic transition. Political
orientations, they assert, are influenced by knowledge, feelings, judgements and
opinions about political systems. Accordingly, the development of a new democratic
system requires not only formal democratic institutions but also a coherent political
culture of which ‘the norms and attitudes of ordinary citizens are subtler cultural
components’ (Almond and Verba, 1963: 3; Almond 1980). Other studies also assert
that without sound commitments to democracy amongst ordinary citizens,
democratic transition and consolidation is highly unlikely (Chu et al., 2001).
However, many other scholars insist that empirical investigation yields little support
for the cultural hypothesis, rejecting cultural determinism or any hypothetical
preconditions to democracy. Diamond argues: ‘There are no preconditions to
democracy, other than willingness on the part of a nation’s elite to attempt to govern
by democratic means’, insisting that ‘neither culture nor history nor poverty are
insurmountable obstacles’ (2003: 2).
Moreover, some political analysts have questioned the role of Islam in influencing
Muslims’ conceptions of political legitimacy and democracy. Islamic political culture,
they argue, is unfavourable to democratic values and principles (Lewis, 1994;
Eickelman, 1997). Huntington, for example, argues that ‘political participation was
historically an alien concept’ to Muslim societies (Huntington, 1984: 208, 1991).
Huntington makes this sweeping generalisation without even investigating whether
the countries that experienced successful democratic transitions had had long
histories of political participation before proceeding with their democratic processes.
Many studies, on the other hand, have been more attentive to Islamic traditions that
promote tolerance and openness. These studies emphasise the rich diversity of
Islamic manifestations, applications and conceptions ‘of the nature of the state,
Islamic law, the status of women and minorities’ (Esposito, 1995: 237; Mernissi,
1992). Consequently, any reductive generalisation of cultural or Islamic influence on
political behaviour in Muslim-majority states will be too simplistic because it would
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156 L. Abdulbaki
certainly fail to reflect the profound complexity and wide variation of the reality of
political culture in Arab and Muslim countries. A closer look at actual political
landscapes in Muslim countries reveals that the relationship between Islam and the
state or the role of Islam in political life ranges ‘from subordination of the state to
Islam . . . to political accommodation . . . to political inclusion of Islam . . . to toleration . . . to ignoring Islam . . . to direct confrontation’ (Abootalebi, 2000: 119).
Consequently, it is plausibly argued that democratisation processes and democratic
culture can develop simultaneously, or that political democracy begets democratic
culture (Rose, 1997). Thus, elite-crafted democratisation can be successful regardless
of whether or not a democratic culture precedes the establishment of democratic
institutions and procedures (Schmitter and Karl, 1991).
In fact, the case of Indonesia’s instant democratic transition prompted many
observers to acknowledge the ‘missing’ prerequisites of democracy. Hence, the
argument that Indonesia ‘displays very few of the traits that political scientists have
identified as propitious for the development of democratic political systems’ has
become widely acknowledged in the literature (Webber, 2005: 6; Uhlin, 2000;
Tornquist, 2004). Many analysts agree that contrary to most modernisation theorists’
calculations, according to which ‘the steady economic growth under the Suharto
regime should have’ led to democratic development, the Indonesian democratisation
process was instigated by the economic crisis which ‘triggered the fall of the dictator’
(Uhlin, 2000: 2, 5; Tornquist, 2002, 2004).
Furthermore, the cultural hypothesis also finds little support in the Indonesian
democratisation experiment. Webber draws attention to the fact that not only did
the Muslim majority in Indonesia not prevent democracy but more importantly, the
two main Muslim mass organisations, the Nahdatul Ulama (NU) and Muhammadiyah, played an important role in facilitating rather than obstructing the
democratisation process (Webber, 2005). The importance of the role played by
Muslim mass organisations since the early stages of the Indonesian democratic
transition is widely acknowledged by political observers. As early as 1998, Budiman
warned that if Amien Rais, the former leader of Muhammadiyah, did not ‘stick to
his former position, namely to ask Suharto to step down and to create a coalition
with the other two mass organizations [NU and Indonesian Democratic Party
(PDI)] the unification of the three biggest mass organizations is in limbo, together
with the prospect of democracy’. What is really remarkable about Indonesia’s
democratisation is that it developed in tandem with the process of Islamisation,
which began to take place during the last decade of Suharto’s rule (Webber, 2005).
Consequently, Indonesia’s democratisation, Hefner argues, ‘should make us certain:
that the desire for democracy and civil decency is not civilizationally circumscribed’,
as ‘[d]emocratic ideals are broadly appealing because they respond to circumstances
and needs common across modern cultures’ (2000: 220221). In short, the
Indonesian democratisation experiment has proven that the cultural hypothesis
posited by some cultural relativists lacks explanatory power.
Asian Journal of Political Science
157
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Indonesian Democratic Craftsmanship: The Transitional Phase
As mentioned earlier, after the fall of Suharto, the role of the student movement lacking an ideological cohesiveness, organisational base and unifying political
leadership and agenda became increasingly marginal. Hence, although the students
succeeded in attracting support and exerting pressure sufficient to force Suharto’s
resignation, the leadership of the reformasi movement was transferred into the hands
of a network of influential leaders, and the democratic transition henceforth mainly
developed through political pacts amongst a group of Indonesian elite. Therefore, the
Indonesian democratic transition took an ‘evolutionary’ path, which ‘was quite
disappointing for the reformasi total agenda of the students’ (Budiman, 1999: 47).
Prominent leaders, such as Amien Rais, Abdurrahman Wahid and Megawati
Sukarnoputri, who formed with the Sultan of Jogjakarta the Ciganjur Group, played
an important role in facilitating political reform and stabilising the democratic
transition (Budiman, 1999: 4647; Falaakh, 2001).
The most remarkable achievements gained during the transitional phase of
Indonesian democratisation were primarily realised through a series of constitutional amendments, a number of new statutes and legislative revisions which
governed the new political processes and restructured the state institutions. Thirtyone of the 37 articles of the 1945 constitution were somehow affected by the new
constitutional amendments (MPR, 2002).2 These amendments and revisions
particularly modified the structure of Indonesia’s representative and legislative
institutions at the national, regional and local levels. They also removed restrictions
on political participation, permitted the formation of new political parties and
enhanced the electoral rules and processes. Other important reforms also included
the guarantee of the freedom of expression, associational autonomy and the
independence of the media.
As such, after the fall of Suharto, the MPR emerged as a major player in the
ensuing democratisation process. Most of all, it facilitated the peaceful rotation of
presidential power three times before the introduction of direct presidential elections.
It forced Suharto’s successor, President Habibie, to withdraw from the presidential
race when it rejected his accountability speech on 19 October 1999 after the legislative
elections. The MPR also managed to impeach President Wahid after he lost the
support of most of his former allies, in favour of his vice-president, Megawatti
Sukarnoputri. Consequently, the elimination of the possible re-emergence of a new
presidential dictatorship was one of the most important achievements that allowed
the democratic transition to maintain consistent and steady, though somewhat slow,
progress.
On the other hand, taking into account the pressures that brought Suharto
down, President Habibie introduced new important measures that liberalised the
political system and expressed his intention to call for premature free and fair
elections in his attempt to present an image of a reformist leader. Remarkably,
Habibie led a reform government which, by and large, managed to liberalise the
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158 L. Abdulbaki
political process at a time when the status quo and Suharto loyalist forces were still
very strong and determined to prevent any meaningful reforms. Habibie’s
government freed many political detainees, lifted restrictions on the media and
managed to pass new laws on elections and political parties, ending Suharto’s threeparty system and opening up the field for free and fair electoral contests. Using his
presidential power and utilising his political influence over the Golkar party, which
then controlled both the People’s Representative Council or Indonesian Parliament
(Dewan Perwakilan Rakyat [DPR]) and MPR, Habibie embarked on a cautious
campaign against corruption, collusion and nepotism (korupsi, kolusi, nepotisme
[KKN]). For example, within a few months, over 20% of the Suharto loyalist
members of the MPR were replaced with pro-reformasi members, either by
voluntary resignation or forced removal. About 229 both appointed and elected
members of the Assembly, including seven of Suharto’s family members, were
ousted from their seats in the MPR.3 Furthermore, as the number of MPR seats was
reduced from 1,000 to 695, ‘the proportion of directly (66 per cent) or indirectly
(29 per cent) elected representatives more than doubled, from 43 per cent to 95 per
cent’ (King, 2003: 5556). In addition to the fact that the number of appointed
military representatives (who were later eliminated, as will be shown) in the DPR
was reduced from 75 to 38, military personnel were prohibited from taking
positions in the bureaucracy while serving in the armed forces (Jakarta Post,
1999b).
Reforms on election laws can be considered as the most important achievements of
Habibie’s government, and certainly amongst the most important steps that
facilitated Indonesia’s democratic transition. On 28 January 1999, the parliament
passed three political laws that provided the legal basis for the 1999 elections. They
included Law No. 2/1999 concerning political parties, Law No. 3/1999 concerning
general elections and Law No. 4/1999 on the composition and membership of the
MPR, DPR and Regional House of People’s Representatives (Dewan Perwakilan
Rakyat Daerah [DPRDs]) (for the full texts see the MPR [1999]; for a detailed
discussion, see Masters [1999]). The laws codified Habibie’s proposal to conduct the
1999 elections and decreed that political parties that meet the legal requirements
should be able to contest elections freely. They also removed the provision for
ideological uniformity (azas tunggal or sole basis) formerly imposed on political
parties and social organisations. Accordingly, though still prohibited from adopting
ideological platforms that contradict pancasila (five principles),4 political parties are
no longer required to adopt pancasila as their sole basis. In addition, the 1999
election law provided for the establishment of an independent General Election
Commission (Komisi Pemilihan Umum [KPU]), the membership of which would
include representatives of political parties participating in the general elections and
five government officials (Jakarta Post, 1999a). Despite some defects, the three
political laws passed by the parliament provided a strong basis for a multi-party
system and by and large, free and fair elections. Consequently, these political laws
Asian Journal of Political Science
159
were broadly accepted by the major political parties and leaders who agreed to
participate in the elections.
Democratic Consolidation in Indonesia
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Before proceeding with the assessment of the extent to which Indonesian democracy
has been consolidated, the completion of Indonesia’s democratic transition has to be
addressed and verified. Linz and Stepan emphasise that the transition to democracy
in a given country:
is complete when sufficient agreement has been reached about political procedures
to produce an elected government, when a government comes to power that is the
direct result of a free and popular vote, when this government de facto has the
authority to generate new policies, and when the executive, legislative and judicial
power generated by the new democracy does not have to share power with other
bodies de jure. (Linz and Stepan, 2001: 19)
If we take these criteria as a benchmark, Indonesia today enjoys the main attributes of
a democratic country. The political process in post-Suharto Indonesia, as the
investigation above has demonstrated, has been predominantly characterised by the
establishment of frequent, free and fair elections, effective elected officials, separation
of powers, inclusive suffrage, freedom of expression, independence of the media and
associational autonomy. Many observers, therefore, consider the 2004 parliamentary
and direct presidential elections the start of the process of democratic consolidation
where the democratic electoral process and peaceful alternation of power have
become established practices. A few months before the 2004 elections, the Asia
Foundation conducted an opinion poll in order to assess the political culture of the
Indonesian electorate, concluding with the assertion ‘that democracy has begun to
take root in Indonesia’ (Asia Foundation, 2003: 2728). Electoral credibility,
according to the Asia Foundation’s report, was no longer a real concern at that
stage, and the priority had to be redirected toward the promotion of democratic
consolidation. Other scholars, such as Azra (2006), also consider the 2004 elections as
the end of the transitional phase of Indonesian democracy. Hence, Indonesia’s
democratic transition has been completed, at least from a procedural perspective.
The extent to which Indonesian democracy has been consolidated and institutionalised, however, is another issue which requires some further elaboration and
assessment. What are the main characteristics and ideal criteria of a consolidated
democracy according to theorists of democratic consolidation? What do we find
when we evaluate the degree to which Indonesian democracy fulfils or approximates
the criteria stipulated by these theorists?
Generally speaking, scholars of democratic consolidation have sought to develop,
not without some confusion, specific criteria that help evaluate the degree to which
the democratic process and practices in a given country are consolidated and
160 L. Abdulbaki
institutionalised. According to Przeworski, democracy can be regarded as consolidated when it
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becomes the only game in town, [where] no one can imagine action outside the
democratic institutions all the loser wants to do is to try again within the same
institutions under which they have just lost . . . all relevant political forces find it
best to continue to submit their interests and values to the uncertain interplay of
the institutions. (1991: 26)
Two primary elements can be identified in these criteria: the elimination of all
other alternatives that may compete with the democratic system, and the consistent
commitment and unreserved submission of all important political actors to the
democratic rules of the game, even when the outcome is not favourable to them.
Schneider and Schmitter basically adopt similar criteria, but they also add the
likelihood of developing ‘mutual trust and reassurance among the relevant actors’,
where the process of ‘contingent consent’ becomes institutionalised, that is, an
established or accepted part of the political structure (2004: 61). They also include
the condition that one or more rotations of power should occur before consolidation
is considered.
Linz and Stepan, on the other hand, extend the notion of institutionalisation
beyond the political and elite-behaviour domain, incorporating public attitude as an
indicator of democratic consolidation. According to Linz and Stepan, democracy is
consolidated:
[W]hen a strong majority of public opinion, even in the midst of major economic
problems and deep dissatisfaction with incumbents, holds the belief that
democratic procedures and institutions are the most appropriate way to govern
collective life, and when support for antisystem alternatives is quite small or is more
or less isolated from prodemocratic forces. (Linz and Stepan, 1997: 16)
However, despite its empirical usefulness, Linz and Stepan’s conception of a
consolidated democracy includes several aspects that make the distinction between
non-consolidated and consolidated democracies largely obscure. On the one hand,
they disqualify regimes in which all violations of the rule of law or individual rights
are not totally eliminated from the rank of democracies, even if they fulfil the
‘institutional requirements for [free and fair] elections in a polyarchy that Robert A.
Dahl has set forth’ (Linz and Stepan, 1997: 1415). On the other hand, when they
clarify some of the qualifications of consolidated democracies, they emphasise the
persistent possibility of democratic breakdown, the existence of different (unspecified) types of consolidated democracies and the improvability of the quality of
democracy in consolidated democracies, stipulating ‘a continuum from low-quality
to high-quality democracies’ (Linz and Stepan, 1997: 16). The problem is that one
finds it difficult to differentiate between a democracy that meets Linz and Stepan’s
criteria and a consolidated democracy, especially of a low-quality kind.
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Asian Journal of Political Science
161
However, although ‘democratic consolidation’ remains a highly contested concept,
it can still be utilised as a useful analytical tool for empirical research, especially with
regard to the hypothetical projection of the likelihood or otherwise of the stability
and continuity of newly established democracies. Therefore, regardless of the heavily
disputed elements, several common constituents can be identified in the theories of
democratic consolidation discussed above: most importantly, (1) the elimination of
all authoritarian legacies and undemocratic alternatives, (2) the unequivocal and
consistent commitment of all significant political actors to the democratic rules of the
game, (3) the occurrence of at least one democratic rotation of power, (4) the
routinisation and institutionalisation of democratic practices and procedures and (5)
the development of a strong majority of public support for upholding the democratic
system. In general, all these elements are basically concerned with democratic survival
and the elimination or prevention of the possibility of democratic breakdown or
‘rapid death’ (O’Donnell, 1992: 17). Arguably, if these five elements persist in a newly
established democracy, they will eventually lead to a deeper and higher-quality
democracy.
As the investigation in this article has shown, and judged against the above criteria,
Indonesia today possesses most of the characteristics of a consolidated democracy,
though some very important challenges still lie ahead, especially with regard to the
deepening and institutionalisation of democratic practice. During the transitional
phase of Indonesia’s democratisation, the pro-reform political actors were heavily
involved in the process of eliminating the Suharto-era authoritarian legacies. As the
New Order restrictions on political participation and freedoms were removed and the
field for free and fair electoral contestation was opened, the new pro-democracy
members of the 1999 parliament embarked upon a democratisation campaign in the
face of an ailing pro-status quo elite. In one battle after another, the reform-minded
leaders who were determined to complete and stabilise the democratic transition
defeated the anti-democracy actors and forces of the status quo. With the total
elimination of non-elected parliamentary members, especially with regard to the
military’s reserved seats, Indonesia’s representative and legislative institutions became
fully democratised. The military accepted the new rules of the game without
significant resistance, and its role in politics has been substantially minimised, though
it has not yet dismantled its territorial structure and business activities that are largely
beyond the control of the government, as will be discussed later. All relevant social
and political forces, Islamic and secular or winners and losers, have always accepted
the outcomes of democratic elections and legislative deliberations. Islamic parties and
forces that lost their bid to re-introduce the Jakarta Charter into the constitution
accepted the outcome without any mass rejection. Mainstream Islamic political
parties have been pursuing their ends by peaceful and democratic means. In short,
democracy has become ‘the only game in town’, and all undemocratic alternatives
have been by and large eliminated.
With all significant political actors consistently showing unequivocal commitment
to the democratic rules of the game, the threat of democratic breakdown or ‘rapid
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162 L. Abdulbaki
death’ has become increasingly unlikely. In fact, post-Suharto Indonesia did not see
the emergence of any significant deviant or anti-democratic actors with access to
substantial resources and support that could be invested in advocating antidemocratic activities and objectives. Even military-backed officials no longer seek
to achieve their ends by the use of non-democratic or unconstitutional means.
Furthermore, since the instigation of the democratic transition, Indonesia’s
advancement toward the consolidation of its democracy has been buttressed by
three peaceful rotations of power. The three presidential alternations occurred as the
result of democratic votes in parliament for Abdurrahman Wahid (1999) and
Megawati Sukarnoputri (2001) or of direct presidential elections for Susilo Bambang
Yudhoyono (2004). The transition of presidential authority in each of these rotations
was peaceful; even though the transition from Wahid to Sukarnoputri became tense
when the former threatened to declare a state of emergency and dissolve the
parliament, no significant political force rejected the outcomes. Consequently, with
the constitutional balance of power between the legislative and executive branches of
government and the highly successful implementation of democratic/constitutional
government rotations, the possibility of the emergence of a presidential dictatorship
has become highly unlikely, this being an essential element of democratic
consolidation.
However, one of the challenges that Indonesia has yet to fully address in order to
join the rank of consolidated democracies is the ability to apply full ‘civilian control’
or ‘supremacy’ over the military (Agüero, 1997: 177). In fact, the extent to which the
Indonesian military (Tentara Nasional Indonesia [TNI]) has been able to maintain its
influence, formally or informally, over government policies is highly disputable.
Historically, the TNI (formally Angkatan Bersenjata Republik Indonesia [ABRI]) has
occupied a central position in political and social life, where under both Sukarno’s
and Suharto’s regimes, it maintained its traditional dual political and military role.
The military doctrine of dwi fungsi (dual function), which was laid down by the Chief
of Staff Nasution in 1957 when he formulated the theory of a ‘middle road’, was used
to legitimise the dominant role of the military in society (Koekebakker, 1994).
Under Suharto’s New Order regime, military officers held key ministerial and
bureaucratic positions, were allocated 20% of the seats in the legislature (this was
later reduced) and were able to maintain control of local government through the use
of its command structure, which is organised on a territorial basis throughout the
entire country providing a parallel to governmental structures (Koekebakker, 1994).
The military has maintained a web of commercial business ventures since 1957, when
it took control of Dutch-owned enterprises. These commercial enterprises enable the
TNI to sustain an independent financial system, which remains beyond government
scrutiny or civil oversight (Rabasa and Haseman, 2002; Nurhasim, 2005). Whereas
the official defence budget is traditionally estimated to cover less than 30% of the
TNI’s operational expenses (more recent estimates place the figure at about 50%), in
order to balance its budget, the TNI relies on ‘profits from its own businesses,
payments from private-sector allies (often for security services), income from black
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Asian Journal of Political Science
163
market activities, and money skimmed from corrupt dealings’ (Human Rights Watch,
2006: 35; Greenlees, 2005; Chipman, 2006). This has become one of the most
formidable obstacles which makes the consolidation of democracy in post-Suharto
Indonesia take a considerably slow pace. In fact, the military’s financial autonomy,
which remains outside government control, makes it harder for the ‘civil authorities
to engage in meaningful oversight of the military’ (Human Rights Watch, 2006: 1). As
a result, the government ‘lacks the power to demand accountability from its armed
forces and to implement needed reforms’ (Human Rights Watch, 2006: 1).
Under post-Suharto democratisation, many positive steps have been taken to
promote the return of the military to the barracks and establish civilian supremacy
and control over it, though serious challenges that somewhat hamper the progress of
democratic consolidation still persist. After the fall of Suharto, the military quickly
joined the reform efforts, re-considering its role in politics and revising its doctrine.
Therefore, the TNI formally relinquished its dual function and withdrew from its
political role. The new constitutional amendments have eliminated the military’s
representation in the legislatures. Accordingly, since the 2004 elections, the military
no longer holds appointed seats in parliament. The police force has also been
separated from the military and removed from its control. Military officers are no
longer allowed to occupy positions in the bureaucracy while still in service, and
civilians have been appointed as ministers of defence. Most importantly, a new law
mandating the end of the military’s economic activity and the transfer of its business
holdings into the control of the Indonesian government within five years was
introduced in 2004 (Paras Indonesia, 2007; Human Rights Watch, 2006).
Although the 2004 military reform law which requires the TNI to limit its financial
sources to the state’s budget has been hailed as a major step towards the full assertion
of civilian control over the military, political observers are increasingly becoming
sceptical about the prospects of its full implementation. While the formal stances of
government officials and the military leadership have been positive towards the
military reform agenda, efforts to dismantle the military’s business and its territorial
structure have, to date, largely failed and progress has been highly selective, ‘slow,
half-hearted, and incomplete’ (Paras Indonesia, 2007; Human Rights Watch, 2006).
According to Indonesia’s Defence Minister, Juwono Sudarsono, out of 1,500 military
enterprises, only six ‘qualify as businesses to be turned over to the government’ (Paras
Indonesia, 2007). Consequently, although its dual-function doctrine has been
formally relinquished, the military has been able to maintain its territorially based
structure as well as a ‘dense web of military/business ties’ and activities that are largely
beyond the control of the government, which ‘creates a parallel administrative
structure to the government, allowing the army to act as a type of localized
paramilitary police’ (Freedman, 2007: 205206).
However, despite its slow pace, military reform seems to be progressing steadily.
Many observers believe that the steady progress of civilmilitary reforms will
eventually lead to the consignment of ‘the military to the barracks for good a
critical Rubicon Indonesia needs to cross in its march to democratic consolidation’
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164 L. Abdulbaki
(Juoro, 2006). In fact, taking into account the total elimination of the military’s
reserved representation in parliament, the prohibition of military personnel from
taking positions in the bureaucracy, as well as the removal of the military’s control
over the police, the progress achieved so far seems to outweigh the remaining
challenges. Some observers argue that with its consistent autonomous stance and
support of the formal political process, ‘the military has contributed positively to the
ongoing security reforms required to consolidate democracy in Indonesia’ (Barron
et al., 2005: 34).
With regard to the criteria of the institutionalisation of democratic practices and
procedures, Indonesia’s democracy demonstrates elements of both strengths and
weaknesses, though many researchers have put more emphasis on shortcomings in
relation to this. It should be noted here that the institutionalisation of democracy is
meant to describe a political environment in which the rules of the democratic game
become ‘routinised’ as a natural part of everyday life, rather than a careful or
conscious process of costbenefit political calculations on the part of the political
actors. Political actors in this situation become habitually committed to the
democratic process and customarily subjected to the rule of law (Linz and Stepan,
1996: 6). Several weaknesses were identified in this regard during the 2004 legislative
elections, though the elections themselves were remarkably peaceful, well organised
and, as mentioned above, are largely regarded as an important step towards the
consolidation of democracy. Barron et al., for example, emphasise that the 2004
elections highlight serious ‘institutional weaknesses’ and demonstrate ‘a need for
capacity-building, increased professionalism and broader social engagement on the
part of state actors’, though they confirm that the elections were ‘generally positive’
and free and fair (2005: 23, 3233).
The weakness of the institutionalisation of democratic practices can also be
identified through the lack of party platforms in election campaigns, especially, but
not exclusively, within the camp of Islamic parties. Almost all Indonesian political
parties rely mainly on charismatic leadership rather than political programs and
policies in order to attract the electoral vote. The Prosperous Justice Party (PKS) is
the only notable exception.
The removal of the restriction on the formation of political parties inspired the
emergence of many new Islamic-oriented parties. These parties explicitly adopt Islam
as their ideological basis, use Islamic symbols to attract the Muslim vote and/or rely
heavily on Islamic social organisations for electoral support. About 21 out of 42
newly formed Islamic parties were amongst the 48 parties that met the legal
requirements for participating in the 1999 legislative elections. This, in fact,
prompted many observers to raise concerns and scepticism about the future of the
democratic process and consolidation in Indonesia (Azra, 2006). Some observers, for
example, began to question the role that Islamic parties would play in a fully inclusive
multi-party system. Some people suggested that the prospects for democratisation
would be bleak and that the Indonesian society would be prone toward intercommunal violence, even ‘among the Muslims themselves’ (Jamhari, 1999: 183).
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Asian Journal of Political Science
165
However, contrary to many pessimistic expectations, Muslim leaders and Islamic
parties have played a constructive role in facilitating and stabilising Indonesia’s
peaceful transition to democracy. Indonesian Islamic parties have participated in
building political alliances, contested in elections in a peaceful democratic manner
and always accepted the outcomes of parliamentary elections and legislative
deliberations.
With the exception of the United Development Party (Partai Persatuan Pembangunan [PPP]), which was one of the three Suharto-era political parties alongside
Golkar and PDI-P (formerly the PDI), the newly formed popular Islamic parties were
founded by former leaders and activists of Islamic social organisations and
movements, such as the NU, Muhammadiyah, the Indonesian Council for Islamic
Propagation (Dewan Dakwah Islamiyah Indonesia [DDII]) and Islamic student
groups. Islamic parties rely heavily on these and other less prominent Islamic
movements and organisations for their membership base and electoral support. Four
of the eight most popular Indonesian parties in the 2004 elections were in fact Islamic
oriented. Three of them were established in the post-Suharto era. They include the
National Mandate Party (Partai Amanat Nasional [PAN]), the National Awakening
Party (Partai Kebangkitan Bangsa [PKB]) and the Prosperous Justice Party (Partai
Keadilan Sejahtera [PKS]). The latter deserves particular attention as it is the only
Indonesian party which managed to obtain significant growth in the 2004 elections.
Considering its impressive performance in social and anti-corruption activities and
programs, the PKS will most likely increase its share of the vote and may even emerge
as one of the two largest Islamic parties in the coming elections of 2009.
PAN was established in 1998 by Amien Rais, with the assistance of a group of antiSuharto reform activists, after his few unsuccessful attempts to form a broad alliance
with Islamic modernist organisations. Rais was viewed by many Indonesian and
foreign observers as a leader ‘who could unite some of the more disparate elements of
modernist politics’ (Fealy and Platzdasch, 2005: 7399). In his efforts to appeal to the
broader national electorate and present an image of a liberal and pluralist leader, Rais
included non-Muslims, especially Christian Chinese, in PAN’s leadership and
promoted pluralism rather than adopting a formalist Islamic agenda (Budiman,
1999). PAN, as such, adopted Pancasila as its ideological basis. However, this does not
represent an insensitivity to, or even subordination of, Islamic aspirations. Rather, as
Rais himself asserted, it signifies the belief that the five principles do not contradict
Islamic tenets (Schwarz, 1999). Islam remains the predominant characteristic of PAN,
because it has been closely associated with, and dominated by, the modernist Muslim
community, especially members of Muhammadiyah. This makes it more appropriately situated within the Islamic camp, and thus it should be included in the
category of Islamic parties rather than the nationalist or secular camp (Schwarz, 1999;
Diederich, 2002).
The PKB, on the other hand, was founded in July 1998 by Abdurrahman Wahid’s
loyalist members of the NU. PKB’s adoption of Pancasila as its official ideological
basis largely reflects Wahid’s pluralist political and religious views. Despite the fact
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166 L. Abdulbaki
that the PKB aspires to be viewed as a non-sectarian party which welcomes nonIslamic elements within its leadership board and membership base, while predominantly dominated by NU members, it primarily represents the traditionalist Islamic
community in Indonesia (Mietzner, 1999b; Jakarta Post, 2000). As such, like the
modernist PAN, the PKB should also be included within the category of Islamic
parties rather than in the secular nationalist camp. Both PAN and PKB rely on
Muhammadiyah and NU, respectively, rather than on their political platforms, for
their membership and electoral support and largely owe their popularity to the
charismatic personalities of Rais and Wahid.
The PKS was founded in July 1998 and contested the 1999 elections under the
name Justice Party (Partai Keadilan [PK]). The party was reconstituted as the
Prosperous Justice Party in April 2003 because in the 1999 election it failed to meet
the 2% electoral threshold required to qualify for participation in the 2004 election.
Whereas the PKB and the PAN primarily rely on historical mass-based Islamic
organisations, the PKS represents relatively new social forces that emerged during the
1980s and 1990s in response to Suharto’s repressive policies towards Islamic activism,
especially on university campuses (Mietzner, 1999b). Most of the founders and
leaders of the PKS are former campus tarbiyah (Islamic moral education) activists
who took part in the establishment of the United Action of Indonesian Muslim
Students (KAMMI), under which they participated in the 1998 protests that brought
Suharto down (Bruinessen, 2003).
Contrary to other Indonesian parties that are plagued with patrimonialism and
corruption, the PKS emphasises merit rather than personal loyalties and adopts a
clear political program with a consistent anti-corruption approach. Although, like
other parties, it seeks to increase its membership base, the PKS considers itself as a
cadre party, strictly avoiding leaders and activists who may potentially stain or
damage the party’s image (Nurwahid and Zulkieflimansyah, 2003). It is not
surprising, therefore, to see that, from the eight major political parties that contested
both the 1999 and 2004 elections, the PKS was the only party which managed to
considerably increase its share of the vote. As such, by initiating a policy-oriented
competition, which may lead other parties to follow suite, and providing a successful
alternative to patrimonial politics, the PKS may lead to the institutionalisation of
political parties and ‘contribute to a gradual democratization’ and consolidation
(Bruinessen, 2003).
Surveys of public attitudes, on the other hand, demonstrate other important and
positive points of democratic consolidation in Indonesia. According to two mass
surveys conducted in 2001 and 2002 by the Centre for the Study of Islam and Society
at the State Islamic University of Syarif Hidayatullah (PPIM-UIN), a strong majority
of Indonesian Muslims support the idea of upholding the democratic system.
Namely, about 70% of all respondents in ‘the two surveys support the idea that
democracy, relative to other forms of government, is best for the country’ (Mujani,
2004: 241). Consequently, democracy in Indonesia is by and large consolidated
according to the theories that consider a democracy to be consolidated when a
Asian Journal of Political Science
167
‘majority of public opinion holds the belief that democratic procedures and
institutions are the most appropriate way to govern collective life’ (Linz and Stepan,
1996: 6). This is a strong indication that the Indonesian public is not likely to lend
support to any potential undemocratic alternative, which minimises the threats of
democratic breakdown and enhances the prospects of democratic consolidation.
Consequently, while democratic breakdown has become highly unlikely in
Indonesia, at least in the foreseeable future, it can reasonably be asserted that
Indonesia’s democracy will most likely survive and continue to progress into a deeper
and higher quality.
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Conclusion
This article has demonstrated that democracy in Indonesia has been progressing
steadily since the fall of Suharto’s New Order in 1998. The 2004 legislative and direct
presidential elections mark the end of the transition to democracy and the start of the
phase of democratic consolidation. During the transitional phase, the Indonesian
political elites introduced comprehensive constitutional and legislative reforms that
democratised the structure of the representative and executive institutions as well as
the political process. These reforms included an effective separation of powers, an
enhancement of the electoral system and the facilitation of political participation.
They also removed Suharto-era restrictions and authoritarian legacies. The
emergence of the MPR as a major player helped minimise the possibility of the reemergence of a new presidential dictatorship.
Furthermore, the main practical achievements of the democratisation process were
realised through the 1999 and 2004 free and fair legislative elections and the peaceful
rotations of presidential power, especially with the introduction of direct presidential
elections and its successful implementation in 2004. In other words, the Indonesian
political landscape today is mainly characterised by frequent, free and fair elections,
effective elected officials, separation of powers, inclusive suffrage, freedom of
expression, the independence of the media and associational autonomy. Consequently, according to most theories of procedural democracy, Indonesia today enjoys
the main attributes of a democratic country and has entered the camp of
consolidating democracies.
With regard to the extent to which democratic practices have become consolidated
and institutionalised, the article has demonstrated that Indonesia has made
significant progress, though there still remain some very important challenges and
weaknesses to be addressed. Almost all authoritarian legacies and undemocratic
alternatives have been eliminated, all significant political actors have demonstrated a
consistent commitment to the democratic rules of the game, several democratic and
peaceful rotations of power have occurred and a strong majority of public support for
upholding the democratic system has developed. On the other hand, the most
significant challenges to the deepening of democratic consolidation are mainly related
to the role of the military and the process of the institutionalisation of democratic
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168 L. Abdulbaki
practices, especially the development of less patrimonial-oriented and more policydriven electoral competition.
Although many positive steps have been taken to promote the return of the
military to the barracks and to establish civilian supremacy and control over it, many
challenges that hamper the progress of democratic consolidation still persist. On the
one hand, the TNI formally relinquished its dual function and withdrew from its
political role. The military’s reserved representation in parliament has been totally
eliminated, military officers are now prohibited from taking positions in the
bureaucracy while in service, and the police force is no longer controlled by the
military. On the other, efforts to dismantle the TNI’s territorial structure have not
been successful and the military has been able to maintain its business activities that
are largely beyond the control of the democratically elected government. The
continuous, though slow, pace of civilmilitary reforms, however, will most likely
lead to the consignment of the military to the barracks and eventually facilitate the
deepening of democratic practices.
The development of political programs and less patrimonial or more policy-driven
electoral competition is another important aspect hindering the full consolidation of
democracy in Indonesia. In order to attract the electoral vote, all Indonesian political
parties, especially Islamic parties with the notable exception of the PKS, rely mainly
on charismatic leaders or social organisations rather than political programs and
policies. Although the PAN and the PKB formally adopted the national ideology of
Pancasila as their official ideological basis, instead of developing policies and
programs, they have built upon the personal popularity of Rais and Wahid and have
relied heavily on the mass-based Islamic organisations of Muhammadiyah and NU,
respectively, for their membership and electoral support. The PKS, however, is the
only party which primarily emphasises merit rather than personal loyalties. It has also
managed to develop a clear political program with a consistent anti-corruption
approach, excluding leaders and activists who may tarnish the party’s image from its
ranks. Therefore, the PKS, especially considering its success in the 2004 elections, may
lead to more policy-oriented electoral competition and contribute to the consolidation of democracy in Indonesia in the foreseeable future.
Notes
[1]
[2]
[3]
In this context, Dahl uses the term ‘polyarchy’ as an alternative to democracy to protest that
‘no large system in the real world is fully democratized’ (1971: 8).
The amendments include the First Amendment of 19 October 1999, the Second Amendment
of 18 August 2000, the Third Amendment of 9 November 2001 and the Fourth Amendment
of 11 August 2002 (for the full text see, MPR [2002]).
Suharto’s family members who were ousted from their seats in the MPR included his eldest
daughter, Siti Hardiyanti Rukmana; younger daughter, Titiek Prabowo; sons Hutomo
Mandala Putra and Bambang Trihatmodjo; daughter-in-law Halimah Bambang Tri; halfbrother Probosutedjo and cousin Sudwikatmono. According to the then Golkar’s Deputy
Chairman, Irsyad Sudiro, the action represented a ‘political commitment to take steps in
purging Golkar of corruption, collusion and nepotism’ (Asiaweek, 1998).
Asian Journal of Political Science
[4]
169
Pancasila refers to the five principles that constitute the national ideology adopted in the
constitution. They include: kebangsaan (nationalism), peri-kemanusiaan (humanism),
mufakat (deliberative democracy), kesejahteraan sosial (social justice) and ketuhanan (belief
in God).
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